GOTCHA! does not appear to be a good credit risk for a $200,000 loan. The company has few liquid assets that can be used to repay a loan. Also, the proposed loan is very large in relation to the small corporation's assets and owner's equity. Because GOTCHA is organized as a corporation Mr. Woods is not personally responsible for the company's debts. Most loan officers would want to find a way to make this loan. They certainly would not want to refuse a 20-year customer of the bank a loan that amounts to less than half of the normal balance he maintains in his checking account.

As a credit officer of this bank how would you deal with this situation? Is there a way you can make the loan without putting your bank into too much of default risk?