Gerri Detweiler
Business Financing eXpert
Do You Trust Your Banker?
July 3rd, 2008
One benefit of being a bit of a packrat is that every once in a while you find a gem hidden in your junk. While digging through some files recently, for example, I came across a brochure from a law firm I had been saving for…well, let’s just say a while.
Titled, Words to the Wise: 10 Rules to Remember When Borrowing From a Bank by Cappello and McCann - now Capello and Noel — it describes precautions smart borrowers should take when getting loans. We’ll help warn you when we can.
I’ve asked their permission to share some of these tips and over the next few weeks I’ll do that. I’ll start by excerpting from Tip #10 – one of the most important:
Don’t ever forget that your banker’s allegiance is to his bank and not to you.
“Many people like to develop strong personal relationships with the people they do business with. They may foster close friendships with a loan officer or banker, especially in a small town where the branch manager knows everyone and there’s only one bank in town.
No matter who close you and your banker become, how many football games you go to together, or how many of his children he names after you, you need to remember that if it’s a choice between his head and yours, it will probably be yours. This is part of the unfortunately rule that you should not trust your banker; in other words, “Borrower beware.”
While the current trend favoring lenders may reverses itself, today courts are saying that lenders don’t have to deal fairly and honestly with their customers, and that they can strictly enforce all the terms of the small business loan documents no matter how onerous and no matter what the customers were told. While your bank may advertise itself as your “friend” and “trusted advisor” and your banker may assure you he is just that, lending is like any other business. It’s a dog-eat-dog world in the lending industry today, and you just might be your lender’s next breakfast.”
Cappello and Noel is one of the country’s top law firms when it comes to lender liability, so you know they have seen plenty of examples of lender-borrower relationships gone bad. You can’t forsee every problem, but you can be smart about shopping for a loan and head off some of them before they begin.
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