I have several lenders interested to finance a deal that I have under LOI, and received multiple lending proposal letters. My question for the Searchfunder collective is: when should I make the call which lender to work with? Can I wait until I have a formal term-sheet from a couple of lenders? Or choose one early on, based on the initial loan proposal, and focus on the paperwork involved with that bank?
My reasoning for working with 2 or more lenders for as long as possible, is that I suspect the rates and terms can change as we get closer to final underwriting terms, so I want to keep my options open for as long as possible. But Im concerned that it will affect my credit score or "creditworthiness" if more than one application lands in-front of the SBA. This is my first acquisition, so not sure how the final process work between me, the lender, and the SBA, and how Im affected. Also, there is already a lot of paperwork and admin involved, so another reason to select a bank earlier than later - but im willing to accept the admin pain if there is upside later on.
So to summarize the question, choose your SBA lender early, or wait as long as possible, or somewhere in-between?
(posting this anonymously since there are several lenders on this platform)
Timing on choosing your SBA lender?
by a searcher from University of Stellenbosch
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You need to interview each lender. I would not just count on the terms for making a decision. I would find out if the Bank is a PLP lender (meaning once they approve the loan it is automatically approved by the SBA), what other deals they have done in that industry, how long the current lender has been with the Bank (this can be key in how long the process takes), what the timeline looks like for their process going forward, and whether they ran the deal by their credit team before issuing the term sheet. Once you find the lender you a most comfortable with that they can get the deal done, I would move forward from there.
Many lenders do not pull credit until they get to the underwriting stage, so you should be safe from that standpoint getting multiple quotes.
If you have any additional questions or need any further assistance you can reach me at --@----.com Good luck picking the right lender.