Business Loans, commercial mortgages, finance

You get what you pay for

“Good work ain’t cheap and cheap work ain’t good”

Isn’t the only saying true – you get what you pay for.  This is especially true when using a broker.  Most brokers that help you find financing earn a commission for successfully finding you the money you need.  Because you don’t pay them like you would any other professional you may be less impressed with the level of service delivered.  The reason is simple – if you are not paying someone to look after your interests chances are very good that they are taking care of their own interests at your expense.  

Recently a client let me know that he was part of a business transaction that needed financing to help close the deal. He let me know that several “advisers” had offered their services to them but they were not interested. When I asked why he said that they felt that paying for service upfront was akin to a “cash grab”. I asked him what they were looking for in an adviser and he said that they just wanted the financing. I asked if they had a presentation package they could send me and he advised that they did. Once I received it I understood why they had not been successful in sourcing a commitment for financing. The presentation package was clearly prepared to help someone understand the business but was not prepared to help someone understand the financing request.

Don’t get me wrong. I know that money can be wasted on people that tell you they can help. It is important to understand that you can determine how you wish to be treated if you will be paying for service. The reality is that you get what you pay for. At Bridge Capital, if a client really does not like the job that we have done putting their Deal Package together we will refund them their money. If they have paid us to review their documents and transaction details they are told in advance what they can expect and if they do not find value in our offering they move on to the next broker. If we are unable to find them the right financing they don’t pay us a commission.

In our business borrowers are rarely prepared for financing. Seldom do they understand the math involved or what a bank is looking for. Presenting information for a mortgage or loan is not the same as presenting information for an investor. A bank and investor are not the same and do not look at the same information when making a decision to commit.

In the case of my client, his group was not successful at finding someone that could deliver them real value for their need – not even us at Bridge Capital. They were more than prepared to pay a commission if the financing was found but were not prepared to pay a portion of that commission upfront. I don’t blame them. In the brokerage world there are many individuals and companies that will take money and not deliver any value. More than a year ago we realized that borrowers need better information before visiting with a bank, lender or investor. We decided to offer fee based services that not only give answers to clients but more importantly provide them with the tangible documents and packages they need to properly present their financing requests.

Most deals are good deals packaged poorly. Further, most borrowers know their business or their transaction really well but are unable to explain it in a way that banks, lenders or investors can understand. The group that my client was a part of finally did get financing at the eleventh hour with an investor that ended up getting a controlling in their business because of their desperation. The cost in the end was significantly more expensive then what the cost could have been getting good advice upfront and paying for it. Nothing in life is free and everything is a chicken trade. You just need to decide what chickens you are prepared to trade.

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