As lenders, we’d certainly like our borrowers to
include "what if" scenarios in their business planning, but too
often borrowers believe another old adage: "Just wait until tomorrow
and things will be better." Our government, the media, my broker,
and others reinforce that line of thinking.
When borrowers tell us they have plenty of
business and the outlook is bright, we need to help them think
through what could go wrong. We have to ask them the difficult
questions they don’t want to think about. For instance, what could
happen to their business operations or products if…
• Unemployment hits 12%?
• GM closes several of its domestic plants for
nine weeks?
• Another retailer fails?
We need to explore those questions and more with
our customers. Ask them if they are prepared to face layoffs or
reductions in their operations. Just as we are looking at all
expense categories within our banks as a result of shrinking
margins, lack of good loans to underwrite, and reduced borrowings,
our customers should be looking at their expenses and making
decisions on what they need to do to remain viable. And just as our
regulators ask us about sources of liquidity, we should be asking
our borrowers the same question.
Borrowers look to their bankers for advice, and
we shouldn’t be cautious in providing it to them. Now is not the
time to shy away from being a resource to our borrowers. If
anything, we must all work together through the recession and beyond
to survive.