Its all about credibility honey!!

Have been working for almost a year now. In this short span, I have worked on quite a few proposals. Fortunately or unfortunately for me, some of them didn’t happen, quite a common phenomenon in the industry.

They didn’t happen due to various reasons, may be because of exposure norms, top management not comfortable, non-identification of proper cash flows, un-comfortable security, etc, etc. The most important reason of all this is the credibility of the promoter.

Now, Credibility is a function of two variables.

1. Ability to pay


2. Willingness to pay

Now, I would be a fool to lend money to a person who does not have the willingness and the ability to repay the facility. Then there are people who have the ability and the willingness and hence we do not foresee any problems with the facility. So who in the end becomes a defaulter?

As can be seen, a person with the willingness and yet lacks the ability is a defaulter as his business may have run into problems due to a slump in the industry. If one trusts the industry and the capabilities of the individual, he will pay you back every penny once he turns his business around, its just the question of time.

Now last but not the least, the person with the ability but absolutely no willingness is a wilful defaulter. He might have the capabilities to turn his company around, but still not want to honour his commitments. Its madness and a cardinal sin to pursue with someone like him, but some times one is so short sighted that they miss out on this one important component.

At the end of the day, his financials may be great, top class but if he doesn’t want to pay…. He just won’t pay. So, all this credit analysis of the company and its financials fail, if the credibility does not exist right from the very beginning.

Net net, when one takes a call on the proposal, it has to be done based on various factors and one of them being, credibility!!!