If you recall the weakest credit application you have seen this year, you will have an idea about the problems with an application I rejected. I assumed the applicant company would not be surprised by the decision. I also assumed they hoped for the best, but expected the worst when the application was submitted.
To my surprise, I immediately received a call from the applicant’s CFO. He told me he was “utterly shocked and amazed” by my decision. He asked if I had contacted the three referenced listed on the application. I told him I did not. At this point, the CFO informed me that: “I failed to conduct basic due diligence” and “My lack of attention and professionalism caused me to make an incorrect decision.”
In the credit file was a credit report as well as an industry group trade payment experience report showing the applicant paid vendors an average of 90 days slow. In addition, multiple vendors had placed the company for collection. At some point, the debtor’s CFO said something like this: “So what do you have to say for yourself?” I explained that even if the three references provided reported his company paid right on time, there was more than enough adverse information on file to reject the applicant for open account terms.
I refer to this particular negotiating tactic by a customer or applicant as: “Shocked and Appalled.” The CFO was shocked and appalled by the decision. My experience suggests that companies use the Shocked and Appalled technique: (a) when they have little or nothing to lose and/or (b) because this tactic sometimes prompts creditors to second-guess their original decision. My recommendation is not to change your decision in the absence of a compelling reason to do so…. Otherwise it is like betting against yourself; no matter what happens you lose. Once you recognize the “shocked and appalled” negotiating tactic, you will know how to react to it.
Comments and constructive criticism are welcomed.
Michael Dennis’ Covering Credit Commentary. Michael’s website is www.coveringcredit.com.
The opinions presented are those of the author. The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors. Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them.