If you know that the True Probability^TM of non-payment is 5 %, you can discount those five per cent when making the loan.

If that renders the effective interest incompatible with the customer's business plan, then you can not make the loan. If the loan represents a large fraction of your equity, then you can not make the loan.

This is why you need to do it before making the loan.

- Jake

Friends come and go. Enemies accumulate.