Before you invest a couple of minutes into reading this post, please note that the headline is totally click-bait. The question I asked is likely not that interesting to most people, and the result is not really “shocking”. But hey, if I can even get one more person to read my blog, then I count that as a winning headline.
So what was the question?
First, some background. I was in the midst of talking with my students about the five C’s of credit (below is a brief description of the five C’s from Bank of America):
- Capacity – Does your business have the financial capacity to support debt and expenses? Typically a business needs to have $1.25 of income to support every $1 of debt service. The extra $0.25 provides a cushion for your business to absorb unexpected expenses or a downturn in the economy.
- Capital – Your business owns capital assets such as cash and equipment; is there enough to help support the financing you want? You and others may have invested capital in your business; how much? The answers say a lot about whether the business is one in which the bank wants to invest.
- Collateral – Accounts receivable, inventory, cash, equipment, and commercial real estate are all forms of collateral that banks leverage to secure loans. In addition to looking at the value of your collateral, the bank will consider any existing debt you may still owe on that collateral.
- Conditions – The state of the economy, trends in your industry and pending legislation relative to your business are all conditions that are considered by banks. These types of factors—often out of your control—may affect your ability to make payments.
- Character – Work experience, experience in your industry and personal credit history are all character traits banks will consider. Your personal integrity and good standing—and the integrity and standing of those closely tied to the success of the business—are critically important.
I decided to just focus on the last one, the importance of character, since that is the one an individual has the most direct control over. As part of the discussion, I tried to use George Bailey from the classic Christmas movie It’s a Wonderful Life as an example of someone who based part of his loan decisions on knowing the family he was lending to.
However, as I started on the example, I noticed more than the usual number of blank looks on students’ faces, so I decided to ask THE QUESTION:
How many of you have seen It’s a Wonderful Life?
I just assumed it was going to be a nearly unanimous positive response, after all, how could someone of college age have gotten that far in life without ever having seen It’s a Wonderful Life?
But their response was the exact opposite; I’d estimate that out of the roughly 90 students in my classes that day, less than 10 admitted to having seen the movie.
Now I’ll admit that there could have been a significant number of students who were simply not paying attention, didn’t hear the question, and so were not about to raise their hand fearing it might result in getting called on.
But I asked the question again and got the same response, which completely shocked me.
I watch it almost every year, and I still cry at the end as the crowd is singing Auld Lang Syne (in fact I’m crying now as I watch the clip below):
George Bailey’s emphasis on character comes back full circle as the town shows its support for him during a crisis.
So my “homework” for the students that day was recommending that they watch It’s a Wonderful Life this holiday season.
It could be an assignment that impacts them for the rest of their life.