By Matthew Gillman, Business Financing Expert & SMB Compass Founder
As a business owner, you know that having enough capital on hand is vital to the survival of your business. For many, this means securing external financing (sometimes repeatedly) from banks or alternative lenders in the form of a business loan.
If you’re looking to refinance or take out another loan for your medical practice, the first lender you may think of is your current one. If you’re satisfied with their services, it may make sense to reapply for another loan from them. However, there is a chance that you might qualify for better rates and terms from other lenders, especially if you have a good credit background.
Not all lenders are the same. As such, each one of them will have different offers when it comes to business loans. Whether you’re looking to finance medical equipment, renovate your clinic, or invest in business acquisitions, here are the pros and cons of using the same lender multiple times.
Pros Using The Same Business Lender
- You can negotiate a lower interest rate and flexible terms
One of the biggest benefits of applying for a loan from the same lender is that you already have an existing relationship with them. If your account is in good standing, chances are, they will want to keep you as a client.
You can leverage your relationship with your current lender and negotiate for better and more competitive rates. Some lenders may also forego some fees associated with the loan processing, resulting in more savings for your practice.
- Less documentation requirement
Lenders will most likely have the same documentation requirements for their loans. That means you won’t have to submit another set of documents if you apply for another financing. You can expect that they will have all your information on file. This includes your payment history, borrower’s history, tax returns, income, and other necessary documents.
Documentation usually takes the most time in the loan application process. If you decide to stay with your current lender, you’ll be able to eliminate the time spent procuring the papers needed.
- No hard credit inquiries
A hard credit pull can cause a temporary dent in your credit score, pulling it lower and affecting your chances of qualifying for better terms. On the other hand, if you’re applying for a loan from the same lender, they may not see the need to perform another hard credit inquiry since they already have first-hand experience with how you are as a borrower.
- Potentially shorter approval time
It usually takes a few weeks to months to apply for a loan. However, your application time could be cut shorter if you’re applying for another loan from your current lender. This is because you won’t have to spend much time procuring the needed documents. If you need quick access to funds, applying from the same lender may make sense.
- Easier account access
Using the same financing institution when applying for a loan allows you to consolidate all your accounts in one place. This gives your easy access in between accounts in case you need to check your balances or repayment activities. Consolidating all your accounts in the same bank gives you easy access to each, saving you much time.
Cons of Using The Same Business Lender
- You’ll potentially miss out on better deals
If you’re staying with your current lender because the process is more convenient, know that you might miss out on better deals. Especially if you’ve built a stellar credit rating, there’s a good chance that you’ll score more affordable and flexible terms if you shop around a little bit.
Not only that, but some lenders may offer additional features that your current lender does not. This could include perks like cashback, rewards, and 0% introductory APRs, among others.
- There’s no assurance of better rates
Again, every lender is unique. Applying for another loan from the same lender doesn’t assure you of better rates. Your current lender knows your current rate, and if they do offer you a lower rate, it may only be slightly lower than your current one.
- You may have to go through the entire application process again
While others may be lenient on the application process of existing clients, some may treat your application as a new one even if you’ve used their services multiple times.
That means they may run a hard inquiry on your credit, especially if it has been a while since you applied for a loan from them. Aside from the fact that it can cause a small dent in your credit score, if you missed some payments on loans, the record will show on the credit report, hurting your chances of qualifying for competitive loan terms.
- Your current lender may be biased
While it doesn’t apply to all lenders, many may give biased advice in an attempt to keep you as a customer. This may cause more confusion on your part.
How to Negotiate for Better Loan Terms with Your Current Lender
If you still want to go with your current lender, you want to ensure that you’re getting the best deal possible. Applying for another loan means you’ll have to devote time and effort to make sure the process is as seamless as it can be.
Here are three tips to keep in mind when negotiating for better loan terms with your current lender.
Show rates from other lenders
Shopping around for offers shows the lenders that you’re serious about lowering your current rate. If the lender doesn’t want to lose your business, they will be more inclined to offer you a much lower rate.
If you’re worried about hard inquiries hurting your credit score, multiple hard credit inquiries made within 2 weeks are usually considered as one hard credit inquiry. So it may not cause significant damage to your credit score.
Know your current credit standing
Credit standings are an important consideration in the loan application process since they will be one of the primary basis on what loan terms the lenders can give you. It’s important to know where you stand credit-wise because you can use this to negotiate for lower rates. If you have a stellar credit rating, stable cash flow, and high-value collateral, you can use these to convince the lenders to offer you competitive rates.
Negotiate for lower rates face-to-face
If possible, go to the branch personally with quotes on hand. While it may seem old-fashioned, the best way to talk to your lender if you want to get better terms. If they still won’t budge, you can at least ask them to forego the additional fees (i.e., closing costs, administrative fees, etc.). The money you save, regardless of how much it is, will add up overtime and save you more in the long run.
The Bottom Line
When you’re looking for a lower interest rate on your loan, it might be tempting to apply with the same lender. After all, they know you, and they have your credit history. However, there’s a chance that you may not get the best deal if you go this route. Some lenders will give you a brand new interest rate even if you’ve worked with them in the past.
The application process might also be expedited if you already have an account with the lender. But again, not all lenders are created equal. Some may make you start from scratch, regardless of how long your medical practice has been banking with them. So before applying for another loan from the same lender, it’s always a good measure to do your research first.
About the Author
Matthew Gillman is a business financing expert with more than a decade of experience in commercial lending. He is the founder and CEO of SMB Compass, a specialty finance company providing education and financing options for business owners.
Healthcare Business Today is a leading online publication that covers the business of healthcare. Our stories are written from those who are entrenched in this field and helping to shape the future of this industry. Healthcare Business Today offers readers access to fresh developments in health, medicine, science, and technology as well as the latest in patient news, with an emphasis on how these developments affect our lives.