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Jun 01 2016
Good Guy - Great Company Syndrome
Shane Norman, CCE, Wheeler Machinery

Oftentimes, I am in a situation where my credit fundamentals are being stretched with the Good Guy-Great Company Syndrome. By this statement I mean, "He is a good guy and he will pay us back, we just need to give him a line of credit, an increase, more time etc." And, they are a great company so why wouldn't we extend them additional credit or increase their terms, everyone else has.  


This syndrome has lead me and my company down a path of substantial grief and losses on occasion and significant profits on the flip side. When we stick to the credit fundamentals (5 C's of credit), we can protect ourselves. When I find myself coming up short of where the customer or salesman expects to be, I often hear this syndrome stated to increase the likelihood that I will buy off on the increased stretch. To counter this I have improved my credit scoring evaluation to reflect today's realistic balances often carried by our customer base. Still, I can come up short. This is when a story from a salesman or the customer themselves comes in handy and where it is common to hear the syndrome pop up.

I like to have these vouchers given by the salesman or customers themselves. These vouchers help me understand a bigger picture - by getting to the bottom of the needs of the customer and my salesman's desire to sell our product. So, I ask a lot of What and How questions. For instance, what can go right but also what could go wrong. I believe many of us in our profession forget to ask both sides of this question.

Let's get to evaluating the how 'good' of a guy or 'great' of a company we are talking about. This question is answered and evaluated in the Character portion of the 5 C's. We look at integrity - has he accomplished what he set out to do in the past or is he all talk? Does he and his company have a good reputation and track record around town? Has he ever been in a pickle financially and how did he get that resolved? In the event something doesn't go as planned, how does he plan on paying you (other C's of Credit - Collateral and Capital.) Now I can give him a reasonable evaluation of Character based on facts, not just over-generalized statements. I have been associated with dozens of bankruptcies of "good" guys and "great" companies. We really don't have to worry about the guys and companies that have continually struggled and given us grief. We know what we are getting into and can generally offset risks with credit strategy. It is this syndrome of Good and Great that we need to watch out for as those are the ones that can surprise us!