Preparation is everything

In the battle of wits that can be the underwriting process I am a huge advocate of meeting with potential borrowers and it is an important part of many of our credit decisions. At Asset Advantage we carry out hundreds of customer visits each year.

In the Art of War Sun Zhu says, ‘He will win who, prepared himself, waits to take the enemy unprepared”. Whilst our customer visits aren’t quite that confrontational, they don’t just ‘happen’. In the art of a credit meeting, preparation is, in my view, critical.

To begin with you need to ensure that the customer is properly aware of the purpose of the meeting. This should help inform them as to who they put up to meet with you. Bearing in mind we are talking about lending money there probably needs to be somebody who is familiar with their accounts. But equally important is that there is somebody present that knows the history of the company and can explain their business model. I’ve met plenty of FDs and Financial Controllers who know the accounts inside out, but know nothing about how a widget is made or who buys them.

Similarly I think it is important to ensure that the customer understands who they are meeting from the lender. At Asset Advantage we send out our Credit Managers, so we like to ensure that customers know that they aren’t meeting just an enthusiastic sales person, but rather a manager who will have real input into the lending decision, if not actually taking the lending decision themselves.

Managing expectations is key. We look to ensure that a broker has closed the customer on rate and we try to give an outline indication as to our expectations regarding security. Of course a great meeting can make us comfortable enough to change our initial view of a proposal, but if, for example we expect to need PGs we like to make sure that the customer is willing to consider providing these before we attend. Meetings are expensive users of time and so if our basic requirements are never going to be accepted by a customer, then we are just being busy fools.

Other things to ask for in advance include requesting a short presentation on the industry sector, especially if it’s one that is new to us.  It is also best to get information such as management accounts before the meeting so that you have a chance to review them and prepare some questions. If you don’t do this then you either put yourself under pressure in the meeting to analyse the accounts or have to do it later and thus extend the whole underwriting process.

I am of the view that doing some background research on the company and the sector is ahead of the meeting is invaluable. Not only does this avoid the meeting having to cover the basics, but it will enable you to ask informed and relevant questions. Unsurprisingly customers tend to respond positively and open up to you when you show an interest in their business and this can help the meeting flow.

Meetings can sometimes be a battle of wits and have the potential to be a somewhat stressful; but with a little bit of planning they can become the most enjoyable and rewarding part of the underwriting job. As Sun Zhu probably never said, ‘Make fun, not war’!