Fable Friday for bankers only:  The greatest PG objection response

I was the home-town banker as a young man many years ago in New York, and one of our business customers was a local private school.  Schools are of course cyclical businesses, so we had the privilege of making a moderate working capital loan to them each year, after the usual negotiations with the principal owner.  But because the loan amount exceeded my authority, my boss accompanied me to visit the school to discuss the arrangements.

Gregory at Medtronic 10-2010 CroppedWe toured the property, as the grounds and buildings were a spectacular sight on top of a mountain overlooking the great Hudson River, and my boss duly oohed and aahed over everything he saw, which was intended of course only to soften up the customer for a review of the terms, one of which was the owner’s personal guaranty.

As a lender, you have been in this situation before I am sure. You mention the PG and the owner starts right in.  “I’ve always paid you as agreed.  There’s no need for my guaranty.  The business stands on its own two feet.”  If a banker hears this for the first time, he hasn’t been in the business very long.

So my boss, in his magnificent Brahmin voice, after expressing his understanding and empathy and encouraging the owner to further express his concerns, answered as follows:

“You may be familiar with what we bankers call the 5 C’s of Credit, as that is how we evaluate any given loan, and to us the most important of all these is Character.  It was because of your strong character that you decided years ago to buy this school and become a leader in the educational area. And it was because of your strong character that we agreed to lend money to you in the first place.  Then over the years, as you point out, it was because of your character that you have always paid us back as agreed.

You know, when it comes right down to it, banks don’t really lend money to businesses.  We lend money to people of character, like you, and naturally we want those people to be responsible for paying us back.”

Well, what do you think happened?  The owner was so pumped up with all that praise about his fine character that he had nothing more to say in objection to the PG.  I listened to all this with the requisite look of wonder on my face and never said a word. But I never forgot it either. It’s a terrific way to handle the PG objection, and no matter what the business is, you can modify the response to do the same thing.  I promise you it never fails. Try it yourself.

All you have to do is…

Think Like Your Customer

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About Gregory LaMothe
I teach people how to sell things. I own the company ActionSystems. Visit my website at www.actionsystemstraining.com.

2 Responses to Fable Friday for bankers only:  The greatest PG objection response

  1. Graham Duryee says:

    That school is still there on that beautiful site!!! Another great sales tip utilizing “you”.

  2. Gino DeGiosio says:

    Straight from the cash flow conversation model…. used it several times and it is effective.

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