What motivates your banker? Embarrassment and fear of losing his job!!!!!

An interesting and important question, what motivates your banker?

I would think a combination of risk assessment,  profit projections and loss mitigation.  Sounds right…and when dealing with a workout, while losses are to be avoided as best as possible, it is certainly an expected   part of the program.

It is my belief that a good banker should be unemotional and focused on maximizing profit and minimizing loss, without ego.

Ok so I was wrong, but really this wrong???

Here is how one recent conversation went with  senior bank officer in the workout department…with a low bid of less then $150,000 for the assets of a business that had borrowed $1.7 million. The buyer had the assets appraised and that was the basis for the offer, appraised value.

The banker was aghast at the offer  and laughingly said he would not accept this offer under any circumstances. In fact ‘he would be embarrassed to submit it’, and that ‘it may cost him his job if he did.’

I queried, why he could possibly feel this way and act in such a manor as the assets were appraised by a legitimate appraiser who worked in liquidations, the business was loosing money and thus only worth the value of its assets, which was being offered. I further reminded him that the inventory had a three day life span so it is worthless in foreclosure, that the business operated out of a lease and thus was not valuable collateral and that necessary licenses required to operate the business would extinguish upon sale or transfer and new ones were not available until 2010, which would have he effect of reducing the revenue by 50% thus making the transfer all but impossible to anyone but the proposed buyer who was  an officer of the current corporation and could manage a license continuation thus making his purchase the only one possible.

But the asset manager declared his position as unmovable, he would not submit the offer to the SBA nor take it seriously under any circumstance, despite our appraisal and the license issue.

I was shocked. I challenged him on the general accounting principle that a business that loses money is only  worth the value of its assets, and thus the offer while much lower then the loan  was a viable offer that needed to be submitted and considered.

He refuses and continues to market the business through brokers and networking. He said he would take another month to see what he could find.

I reminded him of his fiduciary obligation to the borrower, and that his refusal to consider or submit this purchase offer because he was ‘afraid he would lose his SBA guaranty’ was a breach of his fiduciary responsibility when in fact the offer was at appraised value, nothing any of us could control.

The man was motivated by his embarrassment by the low offer in the face of such a large loan and fear of losing his job because he submitted such a low offer. He would rather take nothing then our low offer from a bonafide bidder.

What a predicament. How unprofessional, yet a real barrier to my clients position.

What to do now? I have a few ideas, I will let you know how it works out and what happens. What is imporant is t recognize that it is important to consider what in fact is motivating your bank officer in a workout, once determined it may be easier to deal with his issues.