Just recently, we had a prospect rate shop after one of our partners provided them our detailed proposal. Their bank offered a rate which was very appealing for a loan on their unified communications equipment they were procuring. Our sales team discussed the different benefits they would receive by partnering with us on a monthly payment option. This included the freedom and flexibility the business gains by choosing our monthly payment options versus a loan. However, the customer was determined to get the best rate because they had great credit. Just months later the customer had called, wanting us to refinance the equipment.
Almost all principals of a Sub S corporation are required to guarantee a transaction like this. When they go through their bank it can affect their personal credit. In this case the bank did just that, and reported the equipment loan on his personal credit. Because the bank did this, it had dropped his credit score from 746 to 671 due to his debt to income ratio. Also, the equipment and loan were now on the company’s balance sheet. This was making it very challenging for them to get approved for another loan to procure more equipment for the business.
Customers and partners are trained their whole careers to go after the lowest rates because they think it is better. This client is a perfect example of chasing a low rate and not understanding the entire effect on his organization.