How To Increase Your Closure Numbers by a Lot!
By Steve Mariani
It’s a much different world today than it was back in 1996 when Diamond Financial first opened its doors and when AT&T capital was the largest SBA lender in the nation. As our entire industry grows and experiences the many changes in today’s markets we’ve uncovered some interesting numbers that affect the way we do business, and maybe the way you do too.
The most recent addition to our staff for 2017 has been our CEO, (we’ll call him Joe). Joe has brought a different understanding of our market and sheds light on many facts that should matter to us but haven’t in the past. Being in this industry for so many years has had me focus on things I “thought” were important but now maybe not so much. I’ve always believed that if you provide superior, honest and reliable client service that this could build a strong foundation and customers would show up. That has been true for the most part but could we improve? Can we raise the bar even higher?
Today I share some facts and figures that should matter to you along with everyone else in our industry, no matter what level. If you buy, sell or are involved in any piece of a business acquisition then these are important things to be aware of that can greatly affect your future profits. We spent the money to find these out and hope you can benefit from it, bottom line. Although he works here in our office, we recognize this information can help many and we want to share it.
After months of analyzing report after report on the industry and our specific company information Joe returned with some amazing numbers that changed everything. He first demanded we calculate things like the time from approval to closing along with days to approval and with decline averages and why some are much shorter or longer than others. He wanted this information not just for last year or even the last 2 years, he wanted numbers from as far back as 2008 as he learned more about our world. Needless to say that these where not items we monitored or considered to that level of depth. Once exposed, these numbers were shocking and we knew changes would be coming next.
After all these months he finally brings the information to the surface and begins our conversation by asking me a simple question: What do you think a bank’s actually annual employee turnover rate is? After thinking on that a minute or two I come back with, 15 or 20%? I was not even close. He then asks me to think about the tellers and staff at my local bank where I visit at least 3 to 4 times a month and asks, same teller? My honest answer was that I have witnessed my bank contact change 3 times over the past 12 months, exactly he says! Then he reveals the actual bank turnover rate ranges from 33% to 53% every year (I didn’t believe him so I Googled it). He goes on to explain that the SBA portion of a bank’s portfolio is a very small amount (under 6%) and banks provide these loans mostly by default to continue that customer’s banking relationship. How can they be the experts when the BDO and/or his entire back office changes at a rate of over 33% per year. To be honest, I was very aware that SBA BDO’s change jobs often as I’m sure you are too. This was the first set of numbers that opened my eyes.
Other eye opening numbers he brought to our attention that may be of interest. One of the very largest SBA volume lenders in the country closes only 29% of their loan requests which equates to a 71% decline. It would be ok declining ¾ of your loan requests if the decline was delivered within a few days but when the answer is 4, 5 or even 6 weeks after your application submission then many times the entire deal is put in jeopardy and frustrations builds on all levels and by all parties involved.
Our next conversation began as it usually does with another question: what percentage of Diamond’s loan requests actually close. Now I’m thinking no matter what I say it will be wrong again so I say (conservatively) maybe 80% or so. Shockingly, I was wrong again and after his months of report reviews he has determined that Diamond closes over 94% of our accepted loan requests. His next question is if I have been sharing any of this with brokers. Well no as I wasn’t even aware of these numbers until now.
Putting your client first and providing the highest level of service can only be achieved by staying on top of our industry and understanding the current lending markets and the numbers above. We consistently monitor each and every lender we utilize for important things about them that can possibly affect our future volume levels and make changes when necessary (much more on this next month).
Bottom line, we all know that lenders come and lenders go but if you are not closing at least 94% of your received lender term sheets then it may be time for a change. Give us a try and learn what real customer service looks like. Next month we’ll explain how and why our closure rate exceeds everyone else’s, it’s not rocket science.