CASE STUDY: Beth Interviews Personal Banker

Beth Smith called their banker who provided the loans for them when they purchased a new sedan two years ago and the home mortgage in a previous year. The Smith’s assumed that since their loans were in good standing the bank will make the business loans. In the interview to discuss the new Corner Bakery operating loan she became uncomfortable discussing the future bakery financing with the bank personnel. It seemed to Beth that the banker didn’t understand the future borrowing requirements for the bakery’s day to day cash requirements. Beth provided a detailed personal balance since personal assets are required by a lender to secure business loans.

After a disappointing meeting at the ABC Bank, Beth arranged an appointment with the XYZ bank who was promoting small business loans in their national advertizing blitz. In the interview introduction the loan officer began with small talk. The banker expressed several concerns about lending money to start up businesses especially a risky restaurant loan. The bank personnel inquired why Beth decided to become the risk taker as owner verses being an employee. She explained that her husband and children were very supportive and she was very familiar with the bakery’s potential success since she has been a long time employee. The interview began with the banker asking questions about the assets and debts entered on the personal balance sheet. Beth had prepared her financial document well.

Questions were asked about each asset which she was able to explain. The liabilities were discussed. The banker questioned the short term debt owed on the credit cards. He was concerned what purchases were made on the bank credit cards and the repayments. Beth’s answers satisfied his questions. More questions were asked about the home mortgage and auto loans. The banker considered the debt to be reasonable.

The Importance of Personal Credit Rating