This narrative in the HBR blog demonstrates the disconnect of the big banks from the times. More importantly it shows that many of the so called big-banks will have to be re-examined from the scratch. Can less aggressive lending and underwriting practices support banks that are this big? This seems to be the billion dollar question which the regulators have managed to avoid so far. How long will they be able to manage this feat?
Jack described the business. He explained that it had lost about $25,000 this year, about $10,000 last year and had broken even or made a few dollars profit in the two years before that. Jack was in fact thinking of closing the business down and looking for some other opportunities (from this you’ll gather that Jack isn’t exactly short of a buck or two), but he didn’t think that was anyone’s business but his own, so he didn’t explain that part to the bank official. ”Would you like a small business loan?” asked the bank official.
Well, not really, thought Jack, but let’s see where this is headed. So he replied to the manager that yes he would like to consider a small business loan, but he thought that there wouldn’t be many such loans forthcoming. How much could he get?
“How much do you think you need?” Jack pulled a number from the air: “$100,000?” ”Actually, I think we can do better than that,” replied the bank official. “I think that we could get you a small business loan for up to $200,000. Would you be interested?”
-From the HBR
