[quote=jpinpb]Somewhat OT – I know a small law firm – lawyers been in practice for at least 16 years. They lost their credit line. This is after getting a $12 million judgment. They are hunkering down and not spending.
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My bet is that this was an unsecured credit line. I’d be willing to bet that their bank gave them an unsecured credit line years back and when it came up for renewal the bank said, “Look, we’ll keep the line in place but we need some collateral to back it.” The law firm, offended, said, “No thanks,” and they parted ways. (Also, it’s often a huge hassle for partnerships – the firm is probably an LLC or PC – to post collateral due to complications it causes for each individual partner.)
I know a few very creditworthy individuals this has happened to in the last year. But, they posted some collateral and life goes on.
Any – I repeat ANY – borrower – commercial or individual – that has good credit and appropriate collateral can get a loan at a very low interest rate right now. The problem is that our idea of what’s “normal” in terms of qualifications and collateral coverage has been warped over the last 15 years. Now, it’s back to prudent underwriting. The problem is that too few folks remember or know what that entails. Now they’re learning (or re-learning, as the case may be).
When the credit spiggot goes from Full Blast back to Normal, there’s a lot of pain. As there should be.
