In business borrowing it is o.k. to have multiple lending relationships. Unlike marriage where monogamy is the ideal structure, borrowers can nurture relationships with several targeted lending sources.
But be discrete to avoid damaging a lending relationship. Confidentiality is a top concern for lenders. They want to keep their proprietary bid details from competitors.
Keep your lenders happy with these tactics for discretion:
- Don’t shop your quotes among lenders. They all talk and you will lose credibility.
- It’s not worth a few basis points in interest rate to sell-out the leading bidder.
- Keep close control on electronic and paper lender correspondence by limiting distribution to those in your organization who need to know.
- Don’t disclose the winning loan terms until after signing the loan application and then try to limit disclosure to data ranges. Runners-up lenders will press for market data but hold them off until you ink your deal.
A term sheet will often contain boilerplate language requiring confidentiality as a condition to providing the quote. Be a good borrowing partner and avoid shopping quotes to competing lenders. The small gain you make in pricing or terms could have lasting negative consequences for your lending relationships.