As a business financing consultant my first response to the question of how to best shop around a commercial deal is not to.
There is a saying in the commercial financing world that shopping is death.
While this may be a bit melodramatic, there is a message carried with the expression that should be considered by all business owners and managers seeking business financing.
Unlike a personal credit or residential mortgage application that is evaluated on three to five readily available metrics, a business financing application can take a considerable amount of work to complete.
Each lender only has so much time and resources to invest in reviewing all the applications for financing they receive, so it only stands to reason that they are going to put their efforts into deals they think they can fund with borrowers that are committed to working with them.
The more a deal gets spread around, the more likely the lenders involved are going to become aware of this and when they do, there is a good chance they may automatically decline the deal and move on to the ones they feel they have a better chance at closing.
If you are shopping your own deal around, one of the tell tale tip offs to a lender that you are in full shopping mode is the inquiries on your credit report. Any type of application for business financing will require a credit check and when your credit gets putted and there are ten other lenders listed who have recently made inquiries, then its going to be pretty obvious to any given lender what you’re approach is and they will respond accordingly.
This may be a chance you are prepared to take, but keep in mind that the lender that declines you for shopping (even though they will never say that) could have been the best option available.
The other way shopping can go horribly wrong is through the use of financing brokers. Employing more than one broker plus submitting applications yourself will likely result in lenders receiving applications from more than one source. This again can instantly kill your options with a lender as they wonder how widely this is being shopped and how serious you are about their funding services.
As a business owner or manager, the most important thing for you to do is to manage your own deal. What that means is that you need to keep track of all the places your deal has been and if you have third party agents working for you, they need to tell you where they are planning to send the deal so that there are no instances where the same deal crosses paths.
The second part of managing your deal is not allowing a lender to pull your credit until the end of the application process. One of the ways to get them to move forward without pulling your credit at the outset is to provide a copy of your credit that you have procured yourself for your personal profile and the business profile. This won’t take away the lender’s need to pull your credit before anything is finalized, but it does allow them to make an assessment based on something reasonably current. By doing this, you are eliminating all the inquires to your credit that are dead giveaways to other lenders as to how broad this deal is being circulated.
The most important aspect of searching for business financing is to intimately understand your own financial and credit profile as well as the lending targets that are going to be interested in both at a particular point in time so you can hunt with a rifle instead of a shot gun.
The best way to do this is to work with a business financing specialist who can develop a detailed understanding of your profile and requirements and get you in touch with the most relevant lender or lenders right away so that you’re not wasting valuable time trying to cover the whole market with applications.