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Fear and Greed… the bookends of Capitalism?

Our economy goes in cycles. If this is your first economic down-turn as a business lender, some perspective as to how to do business ‘not-as-usual’ might help.

I really like the title of this blog post, but I am not sure greed got us where we are.
For some, yes. For some, it was (and is) stupidity or carelessness. And a poor understanding of how things could unravel, no doubt. And at the borrower level, a belief that “if a banker will make me the loan I must be able to afford it”. Sad but true.

If greed alone did not get us here, is the fear part wrong, too?
I don’t think so. As a business owner myself, I am carefully watching the impact on my clients, banks and credit unions, to understand what changes we need to make to weather the storm. I have been in business for 29 years so have been through a few bumps in the road. It is scary when you need to make payroll and you are not sure if business is going to hold.

How about a bit of stress testing for your business borrowers?
Here is what I do. Deal with fear (uncertainty) by considering and planning for a range of possibilities. In banking, you call this stress testing. Why can’t your business borrowers do a little stress testing of their own? Perhaps you can help.

      • What has your business borrower worried?
      • What will they do if a major supplier gets into trouble? A major customer?
      • How is their liquidity and what can they do to protect it?
      • Should they reconsider the viability or timing of major business initiatives?

Stress testing in banking, and in business, is as much about the thought process and communication that comes out of it as it is the specific plans that may be developed. In the next post, I’ll share my company’s version of the stress test.

About the Author
Linda Keith CPA is an expert in credit risk readiness and credit analysis. She trains banks and credit unions throughout the United States, both in-house and in open-enrollment sessions, on Tax Return and Financial Statement Analysis. She is in the trenches with lenders, analysts and underwriters helping them say "yes" to good loans. Creator of the Tax Return Analysis Virtual Classroom at, she speaks at banking associations on risk management, lending and director finance topics.