Bank lending appeal procedures

Some of the High Street banks are now promoting their ‘lending appeals process’ which they have put in place to deal with situations where a small business is dissatisfied with the decision that the bank has made about a loan or overdraft application. It is worth knowing a couple of points about this:

  • A business of any size can always appeal a decision – the announcements that they have made here specifically apply to the smallest businesses who might not have the in-house knowledge, expertise or confidence to ‘fight a battle’ though the normal underwriting process (where for them a ‘decline’ decision is probably not going to be changed)
  • It is important to understand how underwriters work, what they are there for and how a business could stand more chance of being successful in overturning a decision

On the latter point, underwriters are there to identify risks and to make a balanced judgement on whether a borrowing application represents a viable proposition for the bank (which is based upon their appraisal of what could go wrong and whether the bank would then get a chance of getting its money back – and overall can the bank make an acceptable return on the deal). Despite what we might all sometimes think those decisions are normally carefully thought through and backed by well defined policies for lending. All decisions are also normally over-viewed so that it is not just one persons opinion

So when an underwriter makes a decision and it is conveyed to the business it should be robust and there should be no reason to change the outcome – the only claim being that the underwriter and all the other people involved were not doing their job properly or the banks policies are wrong – both are difficult arguments to win.

The key to success – and the line of least resistance – is to argue that not all factors have been considered. The best way to do that is to add information that perhaps should or could have been part of the original application – so effectively a ‘re-think’ on how the case was presented in the first case. Not only could such additional information serve to sway what could have been a very marginal decision (i.e this extra bit of information, whilst not hugely significant in itself, could ‘tip the balance’) but it can also act as a bit of a ‘face-saving’ factor, making it easier for an underwriter to change his/her mind on an application

As always it is all about the presentation and knowing how things get done behind the scenes