We’re out of Bullets

I was having a conversation the other day with an independently wealthy, good ‘ole southern man who was absolutely irate that he couldn’t sell one of his gas stations. This man explained to me that he had a very eager buyer and a property that easily generated profit to cover finance costs PLUS leave the new owner a fair amount of income.

He told me all this in order to try and get my bank to rethink doing the financing for the new buyer and asked me flat out why on earth we would turn it down. The answer was pretty simple. I told him, “We’re out of bullets.”

Knowing that he was both a Vietnam veteran and an avid hunter, I knew that he could understand this concept more easily than talking about things like capital ratios, liquidity, shrinking the balance sheet, etc. Instead of all that, I stuck to this analogy. The deal he wanted to get done was like seeing a 10-point deer right when you get up in the stand. It was like being able to take over a town in a war that is essential to enemy supply lines, but has no real protection. We would love to shoot it down…take it over… close the deal, but we don’t have any damn bullets. Now…maybe if you had a deal that was more like a duck we could strangle… or a peasant cart we could ambush and take over without a shot… that kind of deal we could look at doing. We do still have rocks and sling-shots.

For many banks (but by no means the majority), this story rings true every day. No matter how great a deal looks, banks simply do not have enough cash or capital (bullets) to do the deal. It has nothing to do with the borrowers. It’s not meant to be an insult. We just flat out can’t do it unless somebody pulls off a Normandy-like invasion to bring us fresh ammo.