Why "Non-Performer" is such a Bad Label in PPP's
It all comes down to this: In the finance world — and everywhere else for that matter — it is about Trust. There was a time when a person was as good as their word. It’s still true today. All genuine relationships rely on Trust as a foundation. So what has happened? The underbelly of the Internet has amplified a lot of the ugliness we see. From liars, cheats and thieves come a plethora of characters that make it difficult to sort reality from dreamland. This has caused a lot of confusion, misunderstanding, and misrepresentation, and as we know, the confused mind always says “no”. These are near-daily challenges that scare off a lot of would-be investors.
When we receive a set of documents in an application for a private placement program, these are scrutinized for red flags and other oddities. Compliance has to have each document perfected and correct before it goes any further. What happens when a client makes it all the way through Compliance and is offered a contract, and fails to perform? That person/corporation ends up on a non-performers list (kept secret) and once there it is nearly impossible to remove that stigma. If someone is unlucky enough to have been labelled “non-performer” it usually is based on the failure of a client application to complete a deal that was structured on behalf of the client. There are expenses incurred during the process to get a client approved and into a PPP, the most important being Time. Wasting time putting a client into a program only to have it fail because the client did not perform is a fast way to being on the non-performers list.
If a client has true intentions to move forward, that is one thing. However if a client gets all the way to the end where it’s time to sign the contract and then doesn’t complete the deal, that is where the client’s name and reputation are on the line. It may not be fair but being listed is a consequence that can impact their credibility for a long time to come. The best way to avoid this? Finish what you started and complete the deal.