Shotgun Approach to Life and Equipment Financing

When you need something done which requires a specific skill or knowledge, whether it’s in your personal life or business; do you “shotgun” that requirement to as many people as possible or do you consider the alternatives and make one best judgment choice? If you think about it, it depends on the timing and how critical your need is.

If you’re home and the plumbing bursts, you may call several plumbers and go with the first one that can get there; price doesn’t really matter. Timing is short because of the potential damage and you can’t weigh a bunch of options. The same is true if your company has a breakdown of a main production machine; time is money and you get the first repair company that can get there to get you back up running again. In both of these cases, you may shotgun your needs to as many people as possible because you can’t waste time and it’s critical to your pocketbook. So what if you could shut off the water valve to that part of your house or if you had several back-up production machines which could replace the broken one, how would your decision process change?

In this same scenario, a rational approach would be to discuss the requirement with one or two companies or vendors which you have had a good experience with and make your informed decision. This would also be the best approach when financing new equipment or a new project. Too often we see companies “shotgun” their financial package to multiple leasing companies and getting poor results. The issues are numerous; the credit is pulled multiples times alerting all lenders that this client is “shopping” and may have low confidence in getting an approval. Within the finance network, many paths can cross and once one credit team has reviewed an application and then another and another, a red flag goes up that the client may have financial problems and so lenders stay away. Finally, lenders feel if too many eyes are reviewing the same package then why waste time if the client may not commit to them anyways.

Our suggestion; pick one or two lenders to work with. Don’t broadcast your application to multiple sources at the same time; it will dilute your ability to get a good approval. Whether we are a first, second or third choice, we ask that while we review a financial package that it not be given to anyone else at that time simply to allow us to get the best approval possible. Trust us; all lenders feel the same way. They key is start the finance process well ahead of time and not wait until the last 2 weeks before your new machine is scheduled to arrive. With enough time, you will be able to make the best choice without using the “shotgun” approach.