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Recession? The 3 ‘B’s of handling problem loans… Part I

Of course we have all heard of the 3 ‘C’s of credit…but the 3 ‘B’s was new to me.

“Not all credit relationships are successful,” says Gerald Dent, RMA Chair and EVP Credit Administration for Zions Bancorporation, “and there are some fundamental elements to dealing with problem situations.”

With the economy taking a hit and recession looming, perhaps it is time to revisit the lessons learned by lenders who have been through some down-turns.

Be timely
This goes beyond obtaining financial statements, monitoring covenants and visiting the customer. You have to be able and willing to admit there is a problem.

A good friend of mine took his focus off his business while his wife struggled with cancer. His bookkeeper was making a mistake on his financial statements that, frankly, would have been obvious if either he or his banker were looking closely. They weren’t.

After her death, he refocused on the business and it was too late. The bank stepped in too late to help, called the loan and the business folded.

Another business owner I know said it was the best thing that could happen to him when his bank shifted him to their ‘work-out guy’. He said he got advice and counsel that allowed him to see and make the changes needed to save the business. Years later, he was still a customer and a champion of the bank.

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.