Sometimes merchants take a long time to make a decision. And then, they take some more time.
There need to be deadlines to keep merchants tight, maximize deal flow and drive the best results on a month to month basis.
But sometimes, merchants will still go over deadlines.
R. Dawson tells a great ancient fable:
There was once a very old couple who lived in a dilapidated thatched hut on a remote Pacific Island. One day, a hurricane blew through the village and demolished their home. Because they were much too old and poor to rebuild the hut, the couple moved in with their daughter and her husband.
This arrangement precipitated an unpleasant domestic situation, as the daughter’s hut was barely big enough for herself, her husband, and their four children, let alone the in-laws.
The daughter went to the wise man of the village, explained the problem and asked, “Whatever will we do?”
The wise man puffed slowly on a pipe and then responded, “You have chickens, don’t you?”
“Yes,” she replied, “we have 10 chickens.”
“Then bring the chickens into the hut with you.”
This seemed ludicrous to the daughter, but she followed the wise man’s advice. The move naturally exacerbated the problem, and the situation was soon unbearable, for feathers as well as well as hostile words flew around the hut. The daughter returned to the wise man, pleading again for advice.
“You have pigs, do you not?”
“Yes, we have three pigs.”
“Then you must bring the pigs into your hut with you.”
That seemed to be ridiculous advice, but to question the wise man was unthinkable, so she brought the pigs into the hut. Life was now truly inlivable, with eight people, 10 chickens, and three pigs sharing one tiny, noisy hut. Her husband complained that he couldn’t hear the radio over the racket.
The next day the daughter, fearing for her family’s sanity, approached the wise man with a final desperation plea. “Please,” she cried, “we can’t live like this. Tell me what to do and I’ll do it, but please help us.”
This time, the wise man’s response was puzzling, but easier to follow. “Remove the chickens and the pigs from your hut.” She quickly evicted the animals, and the entire family lived happily together for the rest of their days.
The moral of the story is a deal always looks better after something has been added in to make it worse, and then thrown out.
Buyers can get a little perspective and see how terms can get worse, if they don’t make a decision and time drags on. Credit markets are never static and are always in flux. There is a valuable premium on your time.
Maybe its the origination fee going up, or its pricing increasing if there has not been a rate lock. Maybe a higher payment gets the wheels turning. If the merchant is committed, the concession can always be made to restore the initial terms.
What are the best ways you handle merchants going over pre-committed deadlines?