Jeff Judy

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The Art of the Applicant Interview: Part I

For this issue of Jeff's Thoughts, I have asked my good friend and colleague Charlie Dickerson to draw on his decades of experience in banking to provide some tips on a key element in the lending decision: the applicant interview. This is the first of two articles from Charlie on this topic. More about Charlie below.

How much of your time is spent interviewing someone? I'll bet your immediate answer is, "too much!" Unfortunately, much of the time we spend across the desk or a table is wasted because answers are hidden - - perhaps the respondent doesn't realize the importance of the answers, or how heavily the facts you are seeking weigh in the decision process. Good interviews obtain the maximum amount of factually correct information in a time span that is short enough to carry out your work efficiently, but not so short that the customer/applicant thinks your mind was "made up" before the interview began.

Depending on your position, applicant interviews could easily represent a significant portion of your workday. Following some basic rules could make your valuable time spent in these interviews more productive.

Significant time spent in decision-making involves an elimination process - - "Is there any negative aspect to this situation that automatically puts an end to further consideration of this loan request?" If there is no such overriding objection, the lender weighs the application on its strengths and weaknesses. In this "due diligence" phase, all sorts of facts will be uncovered, some favorable, some not so favorable. Some will seem to be very important, some extremely trivial. Part of the loan officer's skill involves the correct interpretation of all data relating to the loan request.

But an equally important risk factor is failing to uncover important facts in the first place. The unknowns can ruin a loan officer's day!

There are two types of facts relating to loan requests; let's call them available and invisible facts. Available consists of all the hard facts that come from collectors and publishers of industry studies, credit agency reports and similar data. Invisible facts come largely from the minds of individuals whose decisions have a direct bearing on the direction the applicant takes and its success in carrying out those ideas. Invisible information might be industry trends, reaction to competitive strategies, strength of management, and the applicant's long-term goals. Invisible facts weigh just as heavily in borrower success as available data do, and they are often harder to determine.

Given enough time, a well-conducted loan interview will certainly turn up available facts. On the other hand the loan discussion can be the only opportunity the loan officer has to unearth the invisible data. The more carefully planned the loan interview, the smaller the chance of overlooking something truly important.

Keep in mind that the goal of the loan interview is to mentally "sit behind the borrower's desk" and understand as well as possible all the borrower's strengths, weaknesses, concerns, etc. After all, once the loan proceeds change hands, the borrower's strengths, weaknesses and concerns become yours. Repayment of your loan depends on the borrower's ability to surmount his or her concerns. If the interview has been weak or superficial, if the invisible data remain undisclosed, the loan officer can be under-equipped to protect the bank's resources when the customer runs into trouble.

Information gathering is not the only element of the interview. You want to begin building a working relationship, impart a favorable impression of your bank, and go beyond collecting facts to understand as completely as possible the applicant business. That's why you want to start with:

Rule #1: Put The Customer At Ease.

When a small business owner looks at you, s/he sees the representative of a major accumulation of wealth. You may literally hold the applicant's future in your hands. This may be just another interview to you, but to the applicant, you represent money and power.

What's more, you make your decisions behind closed doors, so the businessman or woman isn't certain of the process you follow to make those decisions. And understanding the process is important to them!

Often the applicant has spent days or weeks preparing this presentation for you. Make them feel at ease. Meet them at their place of business instead of your office. When you enter the meeting room, look around for clues about what outside interests your applicants might have. If you see photos of dogs and a few framed championship ribbons, that's all the hint you need! Try to establish some kind of personal rapport outside the banking relationship.

But even if the borrower's office is as sterile as a hospital operating room, you still have a last resort: money. So, even if you must start the conversation with something as ordinary as "Did you hear what happened in the stock market yesterday?" dive right in and establish that rapport.

Remember, a more comfortable interviewee is more likely to share information you really need.

I'll share ten more rules for conducting productive interviews in a coming issue of Jeff's Thoughts.

About Charlie Dickerson

Charlie Dickerson began in commercial banking in Pittsburgh after graduating from Dartmouth College. Later he moved to Philadelphia to work for the First Pennsylvania Banking and Trust Company. While at First Pennsylvania, he managed the Credit Department and supervised the bank's Management Training Program. Later, he was active in the Loan Review and Correspondent Banking Departments. After leaving First Pennsylvania, he became responsible for all lending activities for two smaller banks in neighboring states. Charlie was also President of Crossing Financial Consultants for many years and has taught for major trade groups, state banking associations, and CPA firms.