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Shopping around can sometimes be harmful rather than beneficial. Know when to shop and when to let someone else do it for you!

When Shopping for the Best Deal Is A Bad Idea

Raise your hand if you like to save money. Good. That’s all of you. It’s us, too. In fact, that’s precisely why we’re in the business we’re in! We love to help businesses grow, and growing a business costs money. So if we can help you grow your business with the least amount of cost to you, we feel we have succeeded. We are passionate about this.

So let’s talk about shopping for deals. If you want to buy something for yourself personally, you usually do a bit of comparison shopping, right? The internet has made this easier than ever – and it is more cost-effective, too, because you don’t even have to spend a bunch of gas money driving around to a bunch of different stores. Once you’ve found the best price, you purchase with confidence, knowing you’ve got what you wanted without spending a penny more than you needed to. It feels good.

When you need to buy something for your business, it’s the same. You want to spend as little as possible while still getting what your business needs. This is true for office supplies and computer systems, machinery and equipment of all kinds, and even the services that your business requires – financing included.

Shopping around for the best financing deal is the one time that shopping around is a bad idea. Are you surprised? Hear us out…

What Happens When You Shop Around for Financing

When you contact a financing company and ask for a quote, they will probably be more than happy to provide that for you. However, a quote is different than an actual approval, it’s only an estimate and is based on approved credit (OAC). To get a hard and fast number for you, they will need to secure an approval. But to do that, they need to check your credit rating/score. This might be totally fine with you, particularly if you have a good credit rating/score. The trouble is, if you’re shopping around, your credit rating/score is being checked multiple times within a short time frame. Credit agencies see this as a red flag.

Why does this look bad on your credit? It gives the illusion that you are desperate for money. To the agency it appears you are struggling financially and are frantically trying to get your hands on some cash. Creditors can’t tell if you have been declined or if you are receiving money from a number of sources and you may be taking on a lot of new debt. Either way they perceive you as a higher credit risk. So when yet another creditor does a credit check, even if you’ve never defaulted on a loan or anything, your credit rating/score will begin to slip and cause some hesitation on their part.

Even if these creditors are still willing to provide you with financing (which many of them will), the amount they quote you might be a little higher than usual because they’ll be seeing you as a higher risk due to your recently dropping credit score.

How to Get the Best Deal

It is ALWAYS a good idea to get the best deal. So how are you supposed to get the best financing deal if you are not supposed to shop around for financing? Enter the finance broker. (That’s us.)

A broker with access to a wide range of funders has a wealth of knowledge about what each of those funders likes in a financing deal. Funders tend to prefer certain sizes of deals, certain types of equipment, certain types of businesses (new or established, specific industries, etc.), and certain types of credit history they are willing to take a risk on. Some funders have the ability to be flexible with their terms while others stick firmly to their policies.

A good broker also works hard to establish great relationships with their funders. A good broker-funder relationship allows for the trust that is required in order to create a healthy business deal. Sometimes, a funder is willing to step out of their comfort zone if a broker they trust is really advocating for the client.

Why does all of this matter? It matters because, when you use a broker that you can trust, you can leave the shopping around to them. Your broker has a very good idea of which funders are most likely to provide you with the financing you need, as well as which funders are able to provide you with a deal that fits within your budget and the terms that you prefer. Your broker doesn’t need to contact every available funder – just the one or select few that are going to be your best options. This eliminates that hit to your credit rating/score.

Using a trustworthy broker allows your credit to stay intact, as well as allowing you to focus on running your business rather than spending all of that time shopping for the financing you need. Your broker can work for you so that you can work on your business.

If you don’t yet have a financing broker, we would love to help your business grow! Don’t hesitate to contact us and allow us to work for you.

You might also be interested in:

5 Benefits of Having an Outsourced Equipment Lease Financing Department

Don’t Screw Up Your Credit

How To Maintain A Healthy Credit Rating/Score

What Is A Credit Rating/Score?

Why Is Credit Rating Important?