Posted: Tue 13th Jul 2021
So, you want to get your loan request agreed right ? Sure, who doesn’t…
…but surely they don’t agree all loan requests and equally they don’t decline all requests either, so what makes the difference – what makes an application impresses the lender, what gets them to say “Yes”?
Well, the quote says “To understand someone you need to walk a mile in their shoes.” Whilst the person who first uttered this saying is lost to history, the fact that it’s so well known is a good indication of the importance of empathy and understanding. So if you can put yourself in the shoes of your lender, you may be able to see your loan request through their eyes and it may tell you what they are looking for.
Lenders are also likely to have been well-trained, over many years, to assess proposals in a very structured manner. They will give time, consideration and breadth of view to your request. Then they will apply their own knowledge, common sense and detailed sector knowledge to it.
Indeed they want to hear your words, thoughts, judgements and expectations to see if they agree with you. Is what you’re saying reasonable? Does it sound true? Does it sound like this applicant has actually done their research? Are they making fair or outlandish claims ? Are they really going to achieve these expectations?
They have a systemic process, such as the Traffic Light or C.C.C.P.A.R.T.S methods and will apply an orderly manner, so it is good to know how they will do this, so that you can ensure your application impresses them.
Traffic light method
As they read your proposal the lender will write Red, Amber or Green at the end of each section.
Red meaning there is a clear warning here, something they fundamentally disagree with, or some aspect that is immediately outside of their credit policy or framework. This might signal the end of your request and an immediate decline, or it might mean they are merely saying that they or we are not right for your request. It might be that they think you should try another person or department or organisation for this request, in which case whilst you have mis-targeted your request, they have helped you by signposting you to a better placed alternative. This is still more positive than being shown the door or better still that they just never reply to you at all.
Amber means they are neither agreeing, nor dismissing this section, but have further questions, challenges to your assumptions, or are asking for further information. This is all good and forms the basis of a subsequent meaningful discussion with you. This is exactly what you want and it is likely that you will have a chance for a two-way dialogue with this person either by phone or face to face. Listen to their questions as it tells you what your proposal did not communicate and therefore what you can do to improve it for the next reader.
Green is obviously agreement, so don’t over elaborate at this stage, or get too excited, but know that you must have communicated this point well, reasonably and that you and the lender now have common ground.
Assessing how many Red, Amber or Green points the lender has allocated means that they will now say, on balance, if they like or dislike it.
With no reds, mainly greens but two or three ambers, you can expect a subsequent discussion knowing that if you can elaborate, provide further information or address concerns, the lender is leaning towards agreeing to your request, subject to terms.
If there are too many Amber questions, or not enough Greens or even a couple of Red issues, you can start to understand why your request has not been persuasive or impressive enough. It tells you which sections or aspects of your proposal you need to work on or improve. All valuable feedback for you.
This again breaks down your proposal into manageable sections for judgement. The lender is looking to find favourable impression on:
Character: is this applicant of good background, likeable and has appeal?
Capability: does the applicant have the right skillset, connections, resources?
Capacity: is there sufficient capacity of the business to function effectively?
Purpose: what is the loan request for? Will it be spent wisely?
Amount: is this correct? Is it too much or too little to achieve the objective?
Repayment: are the monthly repayments likely, probable or achievable?
Terms: are the terms fair, appealing and mutually agreeable?
Security: how will we recover the debt if the business or applicant fails?
This is how a lender reads, assesses, judges you as well as the proposition you have given them. Whether its these eight (CCCPARTS) criteria or as many sections as were in your proposal, you can now see how the lender is making a broad based assessment to come to a comprehensive and balanced judgement and decision.
Experience, knowledge and training enables them to assess you, your plan and the future outcome. They will either be agreeable or not to your request. If you have impressed them with your circumstance, the opportunity and your presentation of the request in all of these sections, then ‘on balance’ the decision will be right, whether it is an accept or decline.
The challenge is to impress the proposed lender at every stage knowing that one unimpressive section may outweigh your other favourable & impressive sections, when viewed on balance, the final decision is the correct decision for that particular loan request.
Either way, I hope that it is also the decision you deserve.