Bank give out and award loans based on credit applications still – in spite of what you read and hear on TV and read in the financial pages of your local newspaper remain essential for the success of most independent business enterprises. But no banker approves every loan request. True no banker can say “yes” each to each and every credit application and frequently they do say “no” and turn down your credit app.
The denial of any business loan request will no doubt leave you disappointed. But a wise borrower learns from experience.
You should give your banker some due credit. A loan that does not make sense for a bank does ultimately not make sense – financial or otherwise for you. The rejection of a credit request should become a signal to reevaluate the need for a bank loan.
First of all some logical considerations support this assertion. Bankers ultimately do want to make loans. It is their business and profit center so to speak. The interest income comes from business loans remains the main source of income for most banks. Thus it can be seen that declined loans – that should be approved for good financial dollars and sense reasons – add not one penny to that income, and indeed stock and inventory that sits not earning income it should is a detriment and cost to any business or enterprise – and this includes banks and other lending institutions.
Hence profit-orientated commercial lenders do not reject business loan requests arbitrarily. Indeed good bank loans ultimately benefit the bank and borrower. It’s a win win situation for both. In any good and fair business deals both parties benefit. Good business dealings in fact are not flash in the pan , a one shot deal , but rather a long standing relationship building exercise ultimately built on trust. One only has to look at the current housing crisis where people who could not afford housing and mortgage costs were given these loans with dire consequences not only to themselves but to other homeowners as a result of the housing market crash, to the banks and credit mortgage lending institutions and ultimately to the degradation of the general economy as a whole. Whether you argue the banks and bankers were greedy to give these mortgage credit loans for a quick profit and spin off of financial instruments, or that they were forced into it by government and politicians demands via changing rules of credit rules and restrictions and indeed forced or coerced to grant these shaky loans it is all the same in the end. By banker granting credit and loans regardless of financial prudence in the end resulted not in good financial conditions but rather a disaster both for the lenders, the financial credit lending institutions, their bankers and indeed the economy as a whole none the less.
So in the landmark film The Fog of War: Eleven Lessons from the Life of Robert S. McNamara – Mr. McNamara who ultimately went on to become a long term senior figure in the World Bank states that a major lesson in life is to learn empathy with your opponent and their position and perceptions. Not that the banker who sits across the table or communicates via email and fax should be seen as an opponent and adversary. However what you should understand that bankers do decline loans and credit requests on a regular and ongoing basis. It may happen to you in fact. Yet by maintaining financial prudence it is not that they are attempting to portray and rule over you by their powers but rather they are being financially prudent which is in the end is best not only for the bank but yourself and your finances as well.