Lending strategies: due-diligence minimizes credit risk

Due-diligence investigation should always be conducted by banks when lending because this approach minimizes their risks when making deals with other parties. Customer background investigation can be performed by either lenders themselves, in-house investigators or third-party private contractors. Do-it-yourself investigations is useful because lenders usually are familiar with the new customers. However, marketing and customer service is sacrificed because background investigation takes time. On the other hand, hiring in-house investigators lowers investigation cost, improves information gathering and minimizes time required. Unfortunately, these investigators have a tendency to be insensitive to the bankers' needs. Finally, contractors can gather information through cost-effective and time-effective manner. Unfortunately, only a few contractors have proven track records.