Main Street Monday — Beware of the VIP Syndrome in Lending

June 13, 2016

By Bob Coleman
Editor, Main Street Monday

Main Street Monday — Beware of the VIP Syndrome in Lending

Celebrity Worship Wednesday has been a frequent blog topic for me in the past. Lenders become in awe of the borrower and make foolish mistakes causing millions of dollars in losses to their shareholders.

So, it is with fascination I read this morning of an official medical term — VIP Syndrome — that is a root cause of Prince’s death. He joins the list of other notable victims as Michael Jackson, Joan Rivers and Eleanor Roosevelt.

VIP Syndrome is when a VIP uses their status to influence a professional to make unorthodox decisions to please the VIP. VIPs expect a different level of service than the commoners. Lenders must be very careful their professional judgement is not clouded with the celebrity relationship.

Note, a VIP is anyone the banker perceives as important — a prominent community leader, the high school football coach, yes, even a director of your Board.

The Cleveland Clinic published nine principles for caring for VIPs. I have adopted the principles small business lenders should consider when loaning money to a VIP.

1) Don’t Bend the Rules.

If you don’t do it for everyone, don’t start now. If your stated loan policy requires 25% minimum equity for a project, the VIP’s equity injection must be 25%.

2) Work as a Team, Not in “silos”

Everyone needs to be on the same page, the BDO, the underwriter, the closer and the department manager. Recognize there is only one point person that information is conveyed from the lender to the borrower.

3) Communicate, Communicate, Communicate

VIPs have entourages. A CPA, an agent, an attorney, a spouse. Understand upfront who should be involved in the conversation, and don’t leave anyone out.

4) Carefully Manage Communication with the (Social) Media

Under no circumstances should you post pics of you with the VIP on Social Media. I’m not talking about a groundbreaking ceremony. Don’t post anything that offers a hint of impropriety.

If you get a call from the local newspaper wanting to know the status of the loan application for that new downtown revitalization project, have a strategy in place. The simple answer is every bank should have one point person who cheerfully says no comment.

5) Resist “President’s” Syndrome

See Rule #2. Resist the urge for a C-level suit to “take command” of the process. The C-Suite must trust their staff to get it right — and the VIP must respect the process.

6) Loan Approvals must follow normal procedures.

See Rule #1. If the chief credit officer does not write credit memos anymore, do not start now.

7) Protect the VIP’s Security

Instill in your organization that one accesses records unless on a “need to know” basis.

8) Be Careful about Accepting or Declining Gifts

VIPs will offer gifts as a token of gratitude. Have a firm policy in place of what is acceptable before the offer.

9) Working with the VIPs financial entourage

See rule #3

Have you seen a case of VIP Syndrome at your institution?


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