By The Leasing Group

“Character Doesn’t Matter Anymore”

Really!  I was surprised to hear this from my banker friend, but he seemed so certain.


He went on…

I’m serious.  Today’s bank examiners don’t have much interest in a borrower’s character.  They only focus on the numbers.  Look, I’ve been a community banker for over thirty years.  I know my customers.  I know their families, their birthdays, their golf handicaps, if they honor their commitments, their favorite restaurants, even where they go to church.  Most of them have never missed a loan payment, even in bad times.”


I was immediately reminded of the “Five C’s” every bank lender learns in his or her first week of training.  Capacity, collateral, conditions, capital, and of course…character.


Capacity is a measure of the borrower’s ability to take on additional debt.  Collateral represents the assets used to secure the debt.  Conditions are the loan terms, such as interest rate and repayment schedule.  Capital is the money provided by the borrower; sometimes known as the down payment.  All four of these “C’s” are very easily quantified.


Character, is different.  Measuring character is like trying to nail Jello to a wall.  It’s hard to do.  Character refers to a borrower’s reputation.  Honesty, reliability, integrity, and responsibility aren’t found anywhere on a balance sheet or income statement, but they’re just as real.


Maybe those who make today’s rules should first spend time behind the lending desk.   They might learn that a borrower’s character is more important than ever.


Four C’s are okay, but Five C’s are better.