Each week, our managing director and broker extraordinaire Mark Smillie prepares a brief post packed full of wisdom gained from his years in the finance industry. Join us in reading on, and discover some of the tips and tricks good brokers have developed when finding the best finance for their clients!
I was speaking to a really nice guy last week. Denis has been using us to arrange his business finance for years, however he was very close to making 2 out of 3 classic mistakes. He asked us to get a 100k loan over 3 years with no penalty for early repayment. We were able to quickly get the arrangements in place, and I rang Denis up a week later and asked him if he still wanted the loan.
The First Common Mistake:
He said, “Mark, I am not sure how much I actually need. I think I can probably get away with 70k!”
The figures change over the size of the loan, but this is a common issue. It is easy to think “I have been offered a 100k! I will take 70 which should be okay and if I need another 30k, I will just go back and take it.”
Unfortunately it rarely works like that, for the following reasons.
- You may not be allowed to re apply at the finance company for a top up loan for several months.
- A new full application will need to go into underwriting and will be assessed where the company is that day, and if the cashflow has deteriorated in any way, this can have a big impact on the rate offered.
- An underwriter, will have less faith in the companies management as they have got their cashflow figures wrong by a third in a few months.
This could lead to a separate loan been drawn up at twice the interest rate and now leaving the business with 2 monthly payments to make! In my experience, this is the main reason behind a lot of our debt consolidation work.
The Second Common Mistake:
The Director receives a Loan offer, but can’t decide whether to take it and the offer expires.
You may think “No problem they can just re issue it! They have already offered, whats the difference?”
Unfortunately, it does not work like that.
The whole process of the loan application has to start again.
The underwriter might think:
- Are they going to waste my time again? Will we have to put the money we have allocated to them on hold whilst they make up their minds, when we could offer it to someone else who wants it now?
- Does the company have issues that were missed?
- Is the company run by indecisive management?
Or the underwriter might discover:
- Updated bank statements showing that the cashflow has now become tighter than it was
- Directors have been to multiple finance companies to try and shop around, looking for a better deal
Any of the above will severely effect the new loan rate offer, if they decide to re-offer at all.
The Third Common Mistake:
Denis didn’t make this mistake. He knew I could get him a better offer than he could by going direct.
Now, without going through the reasons, let me just ask you a question.
Who will get the best price for a car?
A customer making a one off purchase, or, a fleet buyer, who buys 50 cars a year.
The fleet buyer walks through to the VIP area and speaks to a “Can Do” senior member of staff that they know. The finance director has to sharpen his pencil and offer a really good price! They will not want the fleet buyer going to another company.
Its pretty much the same with a good finance broker. I have been having lunch and golf with some of these finance companies for over 20 years,they want my business and give my clients a great deal.
Please call me if you want to discuss your options on 0800 612 5364 or 07710 466166
Let’s talk today.
Very best wishes