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The importance of referrals in lending

January 7th, 2007 by Kenric

In George Ross’s book Trump Strategies for Real Estate, he has a chapter called Raising Money.  Briefly, he mentions the importance of relationships and networking which reminded me of when I was trying to get my first car loan 8 years ago.  I did not realize it back then, but looking back at my experience now, I lost a great opportunity to maintain a great banking relationship.

It was 1998 and I was 26 and determined to buy an 1991 Acura NSX.  I had good credit and a decent job but it was very difficult to find a loan for this car.  First, the car was over 5 years old.  Not many banks made car loans for cars that old.  Second, the car was $38,000!  Even if a bank did a 5 year old car loan, they wouldn’t loan that much money on a car.

To make things even more difficult, the NSX I wanted was located out of state.  It was in Overland Park, Kansas and I was in Chicago.  To buy the car, I needed to get a check from the bank, fly to Kansas and drive the car back.  The banks would not give me a check for $38,000 unless I brought the title to them.  How could I bring them the title if I couldn’t get the check?

One day I mentioned to my co-worker about my dilemma and he said that he was good friends with the president of a local bank in his neighborhood.  He was able to schedule a meeting for me to meet him about my car loan.  I went in and explained the my situation.  After talking for 5 minutes, he said “Ok, we can do that loan for you.  How much do you think you’ll need?”  I said, “Well, the guy is asking $38,000 but there’s room for negotiations.”  He agreed to give me a blank check with a not to exceed $38,000 limit.  I was shocked.  I asked about getting the title back to him and he said, “Just bring it back to me after you’ve driven back into town.”

Now this was amazing.  I had been jumping through hoops for two weeks and here I was getting approved on a $38,000 car loan based on my friend’s referral!  I’m sure my friend gave me a great referral, told him about my background, my job and pay range but still it was incredible to me because I had almost given up on getting a car loan.  

Sadly, I never used the $38,000 check because the NSX in Kansas was sold before I could fly out to see it.

Looking back at it now, I know I missed a golden opportunity to establish a great relationship with that bank.  When I bought my first home, It didn’t even cross my mind to go back to that bank president.

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