WLN Columns

Five Steps to Increasing Approvals

White Paper Supplement to July 2012 Maxim Minute

Because brokers are not compensated on an hourly basis, it only makes sense to minimize the number of hours spent per funded transaction. These five steps give some insight as to how to maximize the valuable time and effort you put into each of your transactions.

1. Prequalify the Transaction – In today’s economic climate, it has become common practice to request full financials for virtually any sized transaction. This is a stark contrast from the app only approvals of recent past. Because of this evolution in approval standards, it takes a much more comprehensive approach to earn business that was once a much simpler task. Today, by necessity, successful originators tend to play the role of a consultant as compared to the commoditized “sales role”. Credit boxes are more stringent, clients expect more direction, and it is the originators role to offer the value that will not only find them funding, but will offer the most complete solution in a timely fashion. This means getting it done right the first time.

Recognizing where to place a transaction stems from a proper understanding of your client. The first step is to identify with the prospect’s business and the pain points that are affecting their business. The more qualifying questions that you ask, the more value you will add to the conversation as being a trusted source for financing. After having worked with countless brokers, account representatives, agents and other types of originators, it has become increasingly clear to us that the most successful ones are those that are willing and bold enough to ask about the particulars of the prospect’s business. Some originators will feel as if they are encroaching on a prospect’s privacy by digging too deeply into the specifics of their business, financials and overall fiscal state. Quite the contrary, the first step to building any relationship (and this is definitely a relationship), is by investing the time on the front end to listen and appreciate the prospect’s wishes so that they will  in fact confide in you and offer valuable information that you can use to offer the best financing option available.

2. Know Your Funding Sources – One of the toughest things any originator can do is to turn down a deal for lack of having a home for it. After all, it takes countless hours of calling, prospecting, emailing, marketing, campaigning, and networking just to generate that one lead that says they are in need of capital for their business. The truth is, every finance and lease professional has his/her own specialty that they excel in. It is in your best interest to recognize your specialty as soon as possible. This will allow you to concentrate your efforts on originating deals that you have the ability to close. As much as it is hard to part with a “hot lead”, it is far more difficult to scramble to find a funding source that might be interested in that deal. Focus on originating deals that have a better chance at meeting your funding sources’ criteria.

Becoming familiar with your funding sources’ credit guidelines is an essential tool to capitalizing on your marketing dollars. If you know that your funding sources are looking for a certain type of collateral, or a specific type of credit, market to it. By focusing on originating deals that fall within your capabilities, you will avoid wasting time spent on deals that simply cannot get done. Part of this familiarity will come from keeping in contact with your funding sources even when you don’t have a deal that fits their criteria. Funding sources often change their programs, guidelines, pricing, credit profile requirements, etc. Unless you are following their newsletters, recent deal notifications, credit matrix updates, and asking about their programs, you may be unaware of very viable programs that could mean a lot to your business. Other very useful resources in our industry are the associations that put forth so many opportunities to meet and engage various funding sources and service providers. Attending these events and spending time with other key players in the industry gives you a tremendous amount of insight into the tools, trends and markets that are effectively growing the industry. Creating and maintaining personal relationships with funding sources and keeping your finger on the pulse of the leasing world will certainly give you an edge in our ever-changing industry.

3. Summarize the Deal – Previewing a deal is usually the first chance an originator gets to excite a funding source about a transaction. Whether by phone or email, the preview is the originators’ opportunity to motivate a funding source to delve deeper into a deal or to simply pass. During this initial call, the funding source will also determine how much work the originator has put into the transaction and if the deal has been “cooked” enough to present.  Basic descriptors and questions should be readily available during this initial pitch.  For example,What does the client do? What is the request for? What is the economic justification of the financing? What are the strengths and weaknesses that you see? By highlighting weaknesses, you are not hurting your chances of getting an approval, but rather conveying your ability to analyze a transaction and honestly assessing any challenges that will eventually need to be addressed. A summary that addresses these key items will certainly be reviewed more attentively than one that is lacking these key qualifiers. Some of the best practices that we have seen are brokers that have a very clear template that defines these descriptors in a very succinct manner. This is a refreshing change from the deals that simply include numerous unnamed attachments and no document to piece them all together. By familiarizing yourself with your funding sources’ desired deal parameters, you can even highlight the factors within the summary to increase responsiveness.

All too often, this key component is left out of credit packages. Missing a simple synopsis of a deal results in numerous conversations and emails between you and your funding source. This interaction paints the unwanted picture of an inefficient broker. Ultimately deal fatigue sets in for the underwriter, and the inevitable declined results. Funding sources can make quicker decisions by understanding the deal in a concise and accurate format. After spending the time learning about your lessee and the deal parameters, it is important to make use of your hard work by summing it up.

4. Complete The Package – Originators often state that they fear they might lose a deal by asking for too much information from the prospect. On the contrary, if the client is informed of what they need to gather for credit review on the front end, they will be much more appreciative than being asked for, “one more thing” in piecemeal over time.

To illustrate this item, I can reflect upon a recent experience I had in trying to refinance my mortgage. In this case, I was the prospect looking for financing and began working with a bank representative that did not understand the importance of timely responsiveness and communication.  He would ask for a few financial pieces of information, to which I would immediately respond with the requested items in order to expedite the process. Several weeks and numerous unanswered emails and voicemails would pass until another request for information would come up with the same results. After months of this same lack of effort and responsiveness, I decided to withdraw my application and take my package to a mortgage broker. This broker requested all of the documentation he needed and set my expectations on timeframe and the closing details upfront.  Because he made things clear, I knew what to expect and acknowledged him as a valuable consultant that had the knowledge and resources to complete my refinance. In keeping in line with my expectations, he was able to close within a matter of weeks. This experience allowed me to understand how important it is to manage expectations with prospects on the front end rather than offering excuses for missed deadlines and requests for additional items.

There is a tremendous advantage of having a complete package when presenting a deal to a funding source as well. Remember funding sources are looking at deals all day long, and the best way to capture their attention is to differentiate your packages from the others. This can be as simple as naming PDF files according to their content. You do not want to convey a lack of effort on your deal because you have multiple attachments named, “Scan 01, Scan 02, etc.”

5. Price the Deal – Nothing causes more aggravation for all parties involved in a transaction when there is no expectation of pricing up front. The last thing you want to do is spend your valuable time packaging a deal that gets approved by a C credit lender, when your client expected A rates. If you have done steps 1 and 2 above, you should have an idea of where your deal will have a good chance of getting approved, so price it accordingly.

Pricing a deal involves much more than just offering terms to a prospect. In fact, there is a much more systematic approach in understanding the type of prospect you are dealing with. Typically, prospects can be placed into one of three categories; rate sensitive, payment sensitive and total cost of financing sensitive. By offering a range of payments, you can quickly assess which pain point is of greatest importance to your prospect. You will then have the ability to discern whether or not this prospect’s expectations are within the realm of programs you can offer.

If you are unsure of how to price a transaction, you can often find it in the credit matrixes of your lenders. Otherwise, like Maxim, many lenders will gladly give you a range of pricing to quote after a quick preview of the deal.