Most bankers are personable people, so it is easy for borrowers to make the mistake of assuming that a personable Manager is also a competent lender, who will lend them the money they need on the most competitive terms. This isn’t necessarily true – the two do not go hand in hand.
The most important thing is the Manager’s ability to do their job properly. If they also happen to be a nice person, that’s a bonus.
Lending money safely
The reason for this is that banks always try to lend money safely, and rely on various checks and balances to achieve this. One of the most fundamental checks is to have another Manager – in a centralised credit department – sign-off on each borrowing application.
These Credit Managers are in effect the real decision makers who use this sign-off procedure to control the terms on which weaker Managers are able to lend. They can do this by cutting back on the amount, by calling for more security, or by imposing tougher conditions.
So, those Lending Managers whose internal standing at the bank is good will have more latitude to lend on terms they think are appropriate; but if their standing is weak, perhaps because of a poor bad-debt record, their recommendations are liable to come under closer scrutiny and be challenged.
Granted, or declined?
A Lending Manager’s standing can even make the difference between finance being granted or declined.
The problem for borrowers is that they will never know whether a personable Manager is also a good lender.
If you are a business borrower and would like more information about this, and some of the other issues facing you, then read our e-book entitled “How and why lending decisions go wrong and what to do about it”.