Child: Can I have ice cream for dinner?
Parent: Because ice cream isn’t good for you.
Parent: Because it has no nutritional value.
Parent: Umm … I guess because its makers wanted to make sure it was tasty.
Parent: So they could sell more of it.
If you’re a parent, you know this scene all too well. And if you’re an honest parent, you know that at times all those incessant questions can be downright annoying.
But you also know that asking those questions is a critical part of the child’s developmental process. Children have no built-in knowledge base, so asking questions – and getting answers – is the way in which they begin to make sense of the world around them.
It’s similar to great lending, actually – minus the “annoying” part.
Great lenders always ask the extra question. They know that the more knowledge they can gather about the customer’s situation, the more ways they can find to structure a deal that will benefit both the borrower and the bank.
Ask, Then Listen
It’s not enough, though, to just fire away with question after question. Great lenders listen – really listen – to the answers their customers give.
That may sound simple, but if you’ve ever watched a locker room interview scrum after a big game, you’ll see how often people who are paid to ask questions – sportswriters – fail to do this.
Reporter: “Johnny, tell us about your game-winning hit.”
Player: “Well, I was just looking for a pitch to drive. But I really think the key was the week I spent in a sweat lodge before the game. That really cleared my mind.”
Reporter: “Uh huh. So what are your thoughts about tomorrow’s matchup?”
We exaggerate here to make a point. But often writers are so intent on getting through their list of questions (and getting back to the press box to file a story before deadline) that they fail to listen to answers that, if they followed up on them, would give them a much better story.
What’s the Customer Really Saying?
So how would this play out in a lender/borrower interaction? Consider this hypothetical situation we often use when demonstrating the PrecisionLender software.
Let’s say you’re trying to win a deal with a borrower for a $1,000,000 commercial real estate loan. But the borrower says he’s planning to go with Bank Down The Street, which is offering a rate that’s 50 basis points lower.
Some lenders throw up their hands right then. The deal doesn’t fit their rate sheet so then, oh well.
Great lenders start asking questions. “What can you tell me about this deal?”
Perhaps then you find out how, exactly, Bank Down The Street is offering such a low rate. Maybe it’s because part of the loan is guaranteed. That could be the end of the story. But the great lender channels his inner annoying child and asks about the guarantee: Who’s providing it? What are the details?
In this hypothetical, the guarantor is the borrower’s father-in-law. Again, this could be the end of the line. But the great lender – unlike the mediocre sportswriter – is listening to the answer, and he detects that the borrower is less than thrilled at the prospect of “owing one” to his father-in-law. So the great lender asks more questions and finds out that the borrower would be more than willing to cut a few months off the length of the loan if it means he can get the same low rate and not have to rely on his father-in-law’s guarantee.
By asking questions and listening to the answers, the great lender has gathered enough information to turn the tables and win another deal for his bank.
In the end, the only people truly annoyed are the lenders working at Bank Down The Street.