Best and final or sharpen your pencil? What does that have to do with getting a business loan?
There are two main approaches for managing a loan bid process.
- Best and final permits the lender to make one bid without the opportunity to revise their loan quote.
- Sharpen your pencil gives the lender a second chance to move terms and pricing closer to the leading bidder.
You may have a virtual tie among two or more lenders so you need to bend your best and final policy to allow another turn of bidding and break the deadlock. You might have a lender so far outside the competitive bids that a second chance doesn’t make sense. Adapt to the bidding environment.
Decide ahead of time which bid philosophy you will take and stick with it. Let all competing lenders know the ground rules for bidding. A best and final approach will prompt lenders to put their best quote forward knowing there is no second chance.
Level the playing field for the finalists by fairly sharing consistent information about the bids to-date. It is best to give general parameters or data ranges about the competitive bids instead of specific quote details.
You can preserve your lending relationships and get a competitively priced loan by following a sound bid management policy for your next round of business financing.