Re: So don’t bluff the banks - Posted by Eric C
Posted by Eric C on July 08, 2003 at 13:48:01:
Hi Candice -
Congrats on your bank deals.
For years, I’ve made the focus of my business banks (lenders of all types, really) and corporations.
I don’t doubt that it’s possible (unusual, but possible) for an investor to negotiate great terms (and deals)from “sophisticated” parties. After all, I’ve done it for a couple of decades now.
At the same time, I also have to say that the world of lenders is pretty small (they communicate with each other constantly)and while competition is relatively fierce, they definitely see themselves on one side of the table and all investors on the other. Get my drift?
Defaulting on purchases or terms will make for a very short career. Word gets around. Quick.
So, I agree – don’t bluff the banks. In fact, I never bluff. Period.
A lot of my competition thinks along the same lines as you do. Negotiate in good faith, get great terms, and move on.
I work a little differently. In almost every case, I talk directly with the “authority official of the day” and usually leave an offer on his (her) desk along with a cashier’s check for the entire amount of that offer.Sometimes, if I think the negotiations will be protracted, I’ll open an account (talking about compensating balances works well at this point)for a nice round number (six figures or so).
You can see where my offers require less thought on their part, can’t you? Hmmm, can he or can’t he? Guess so, since the moneys already here. Keeps the mumbling to a minimum and allows deals to move forward very quickly.
Here’s my point: if you have developed a good working relationship with a lender or two, don’t screw it up by not making good on your end of the deal(s).
There will always be a guy like me just waiting for the corporate types to get tired of proposals falling through.
PS - one more thing – about that 21 day period? I guarantee I’ll steal that thing out from under you if you’re not careful. That’s entirely too long if your competition is using cash. Be careful.
And what banks want? They want liquidity. They want to put this deal (the bad one) behind them ASAP. But overall, what they most want is not to look foolish. Appearing foolish in public (or to their peers) is tantamount to bleeding profusely in a tank of hungry sharks.
A sharp investor should be able to use that to their advantage.