Ever since you were old enough to watch TV, you’ve been exposed to massive branding campaigns by Lenders for personal loans and financing, and business loans and financing.
The primary brainwashing we all receive is that your banker is your friend and that if you need a loan, come in and see him and he’ll help you out.
Its a fantastic marketing strategy driven by billions of dollars in advertising whereby we all have the major banks in our cities, regions, and countries branded into our brains.
The offshoot is that the major banks draw everyone into their marketing funnel and they keep the ones they want, which for business financing would roughly be 10% or less of those that apply.
Why so low?
Because major banks are low risk lenders that are looking for the low risk customers only.
They just don’t tell us that.
Now there are hundreds of thousands of lenders in the world outside of major banks and they do much the same thing, albeit on a smaller scale.
But the message is pretty much the same … Come and see us and we’ll help you out. Or, if we see lots of people, we’ll be able to pick out the ones we’re looking for.
Basically, the general population is treated pretty much like cattle when it comes to business or personal financing… we’re driven in one direction and then redirected in another.
There are a number of reasons.
First, in general, our society has a very low finance I.Q. due primarily to the fact that there is virtually no basic finance related education, so lenders would rather say they can help everyone than risk sending out a confusing message of what they really want in what I would call meaningful detail.
Second, a lender portfolio can be quite complex to manage and ever changing as the overall market place changes which causes their target to change. So no lender wants to say this is what they’re looking for today, and then potentially need to change it tomorrow. Its better to keep things vague. So instead, they just keep rolling out the same “come on in, we can help anyone” message.
Third, Lenders are opportunists just like the rest of the world. During the latest sub prime market fiasco, Major Banks cut back and in many cases stopped lending money, crippling the money supply. They used the crisis to put pressure on the government to give them payouts and concessions to strengthen their balance sheets, otherwise the lack of available capital would further worsen the recession.
Asset based lenders did the same thing. Because “A” Banks or Big Bank were pulling out of the market, more expensive asset based lenders were getting better qualify deals. The smart ones were making a fortune taking on lower risk deals without lowering their fees. But this also left a funding gap in the “B” and “C” Markets as its becomes a domino effect from the top down.
So keeping it vague, has always been the way to go. And as a result, it can drive you around the bend trying to figure out exactly who can help you at any given point in time… who is currently relevant to your specific financing requirements.
So, what can you do to find the right source at the right time?
1. Be realistic in the sense that no matter how much a lender may flip flop on their client selection, major banks, for example, are always going to be low risk lenders that are more focused on balance sheets will low leverage than anything else. If you don’t fit that basic description, don’t apply. Each category of lender has a basic profile that they won’t stray too far from, no matter what they tell you.
2. Consider utilizing the services of a financing consultant/specialist (not just a broker … big difference). This is someone who has their ear to the ground and is staying on top of the twists and turns in the market.
3. Instead of blindly applying to lenders according to the way we’ve been brainwashed, start qualifying them yourself. Remember that you’re the customer and you’re time is worth something too. So instead of patiently going along with some of their long and drawn out application and interview processes, start by asking them questions related to what you’re trying to do and focus your time one the ones that give you the straightest, most direct, and most committed answers.
Its still going to be a bit of a crap shoot, but still better than just showing up and expecting anyone to be able to help you, despite what they tell you in their latest commercial.