Tag: Term Sheet

Psychology of Lending and The Dunning-Kruger Effect

Better Borrower Management

There is some basic psychology knowledge that all lenders must possess to help them excel on their job.  One field of psychology that lenders should understand is the Dunning-Kruger effect. The good news is that the Dunning-Kruger effect is not a disease, a syndrome or a mental illness.

Learning from Other Bank’s Commitment Letter Mistakes

Better Term Sheet Practices

One of the best ways to become a better banker is to pay attention to your competition and analyze their strengths and weaknesses.  We pay particular attention to term sheets and commitment letters from other banks to learn what other banks are doing well and where they make mistakes.  We intend to capitalize on competitors’ weaknesses and to learn to address and respond to other banks’ strengths.  We recently reviewed a term sheet that we thought highlighted some in

The Best Way We Found To Quote Loan Pricing

Better Lending Practices

In our previous blog (HERE), we discussed the three primary criteria that banks should consider in choosing an appropriate index to price commercial loans.  We concluded that, for the time being, LIBOR (surprisingly) was a superior index for community banks to use because of its high correlation to community banks’ cost of funding (better than Prime or US Treasury).  We also discussed why LIBOR is a more flexible loan index for community banks becau

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