Much Ado About Something: Loan Covenants and Small Business Fit

The last newsletter on global credit provisions triggered some discussion about rules of thumb that bankers use, or used to use, to estimate and manage their problem loans. All of this was timely, as I had the good fortune to teach a three-day course in late August in Kenya to African bankers from Kenya, Malawi and Uganda on non-performing loan (NPL) workouts and approaches to debt management.

This newsletter does not duplicate what I just taught. Rather, it pulls some lessons from the banking side to offer advice to small business on how to develop needed financial accounting and reporting systems to demonstrate creditworthiness. Hence, the title of this newsletter edition, which is a pretentious take-off on Shakespeare and implies that the difference between accessing credit or being rejected may hinge on attention to the kind of detail that creditors use in their models and risk evaluation practices.