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Say 'No' if you can't trust them…

In sea kayaking, you have to trust the people you are paddling with. Even if you are already at the boat launch and ready to go, if you get a bad feeling about a fellow paddler, you should pack up and go home.

The trust problem in kayaking is more likely to be a paddler who is unprepared or unwilling to follow the leader and may compromise the safety of the trip. In lending, it really may be about honesty.

Signs of trouble:

  • They keep critical, required information from you because they think it will look bad.
  • They either admit to, or get caught, providing inaccurate or misleading financial statements and/or tax returns.
  • They admit to (or even brag about) what appears to be underhanded treatment of employees, customers or vendors.

Signs of trustworthiness:

  • They communicate early and often if they are going to miss an agreement.
  • They provide accurate information. If their tax return does not reflect their cashflow for legitimate reasons (ie:because it is cash basis or includes significant nonrecurring expenses or losses) they explain why while making it clear that their company filed accurate returns.
  • They demonstrate their high level of honesty and ethics by sharing their stories of honest dealings with others. If you, the lender, are new to them but they are not new to the bank, they share with you stories from times past when they displayed these qualities in their dealings with your bank. (Of course, see if you can verify this if it sounds unbelievable).

Being honest is not enough to get the loan. But being (or appearing to be) dishonest is enough to kill the deal.

How else have you detected dishonesty on the part of your borrowers. Tell us a story!

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.