Not too long ago, most of the major lenders still worked under a regional financial model where the bank manager had a significant amount of lending authority and decision making.
Overtime, this proved to be a very dangerous way to operate as individual bias and relationships could skew the decision making process and could ultimately lead to loans being made that were not in the best interest of the lender and the lender’s owners or shareholders.
Similar to most major companies, there is now a clear separation of duties in the organizational and decision making hierarchy of the marketing/sales group, and finance/underwriting group.
Taking it even one step further, while marketing and sales can recommend loans, only underwriting can actually approve or put them forward for approval if a board or higher level of signing authority is required.
Yet, despite this well defined operating structure that has been the standard for close to ten years in the lending world, most business owners still think that their local branch or even regional manager can pull a few strings and get their application approved.
Sorry folks, but that’s not going to happen.
What’s even more confusing to anyone looking for a business loan or business financing facility is that the people you speak to at the bank (marketing and sales folks) will almost always be very interested in speaking with you about your requirements and are prepared to spend time collecting your information, even if there is very little hope of the deal ever getting funded.
Sometimes this is a function of the front line sales team not keeping up to date with what the underwriters are approving, sometimes this due to too much turnover at the sales position where you’re almost always dealing with someone new or fairly green, and sometimes its because the sales force has an incentive to collect applications, regardless of how irrelevant they may be.
So how’s this relevant to today’s post?
As a business owner, you need to be more well aware of the financial parameters of a given lending institution. You may not be able to know exactly what they’re approving at any given time, but its not to hard to get a grasp of their basic lending criteria that is always in place.
Taking any amount of time to “sell” a deal to lender where the fundamentals of the deal do not fit their lending criteria is going to be a waste of time 99% of the time.
Its easy to get caught up in a false reality of who can help you when everyone you come in contact with at a given lending organization appears to be very interested in your deal. But lets not forget, the front line folks can’t lend you money. In fact, its not uncommon that during a business financing application process that the applicant never meets or even speaks to the real decision maker or makers.
And spending too much time barking up the wrong tree can take months and months of time before you realize nothing is likely going to happen, which is another problem in the lending world and that’s a failure to get to “NO” quickly.
When seeking business financing, its important to thoroughly understand the fundamentals of your business financing request and then making your application for financing to a lending source that’s going to be able to lend against those fundamentals.
Spending too much time trying to convince front line individuals how great your planned use of funds is when they work for lenders that aren’t likely to be interested is likely going to be a waste of time.