Ravi Chandran
Not everyone knows the art of loan negotiations
By: Hitesh Khan/
When searching for good commercial loan financing, there are a number of different options that you could take. When you are dealing with a commercial lender, you want to make sure that you are getting the best deal.
If you do not know the art of loan negotiations and if you agree to something prematurely, you could end up regretting it later.
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Many of the terms of a commercial loan are negotiable so you will want to do your best when negotiation during the loan process. This can save you some substantial amounts of money and give you terms that you feel comfortable working with.
Here are a five handy tips which will be helpful for loan negotiations to help you expand your business.
1. Do your homework and go to the right lender
You should research the background of your lender and different products that they have on offer before applying for good commercial loan financing. You should find lenders that are able to help you and not waste time at banks that cannot. Although there may be several similar products on offer at the different lenders, the fine print may make a lot of difference from one commercial loan to another.
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2. Be Persistent
When you doing loan negotiations, you need to stick to your guns.
Do not waver from what you want. The lender needs your business a lot more than you need them. There are many lenders that you could potentially go with, so do not hesitate to threaten to leave if you do not get what you want. You may have to concede a few things here and there, but overall, you should be able to get what you want. The trick is to not waver on your requests and just keep asking until you get them.
3. Be prepared
Preparing for a business loan is like dressing for your wedding, so you want to look as attractive as possible and present yourself like a good risk. While you need to speak the part, so does your paperwork. You should get copies of your credit report to identify any negative items and try to repair or remove them. You should also have a letter of explanation prepared for any negative items that remain.
You should also have your tax returns for the past three years, three years of fiscal year-end financial statements, and year-to-date financial statements. You should prepare a personal financial statement listing your income, assets and liabilities. Also, have copies of up to six months of bank statements, and any recent appraisals you have had done.
Before you arrive at the bank, make sure you and your paperwork are organized and neat. Neatness, grammar, spelling and organization count. Sloppy requests don’t even get read and are often rejected immediately.
4. Be Silent
One of the oldest loan negotiations tactic in the book is being silent after an offer and it still works today. When you make a counteroffer on a particular term in the loan, you just sit silently until they answer. Sometimes, this tactic can result in some pretty awkward silences. They may be thinking about whether or not they intend to accept the offer.
However, many people interpret that incorrectly and come back with another offer right off the bat. When you experience silence, do not come back with a different offer just to break the awkwardness. Just wait until they say something, good or bad. Then you can make the appropriate adjustments to the offer. In getting a good commercial loan financing, do not be the first person to speak after you make an offer.
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5. Shop Around
One great way to get what you want is to shop around. When you shop at multiple lenders, you will have a much better chance to get what you want. Go to a number of different commercial lenders and see what they have to offer you. When you find one that you want to work with, use your shopping as leverage in negotiations.
The commercial lending business is very competitive. If you let them know that you are shopping around and have some estimates, they will be much more likely to accommodate you.
Use the other lender’s estimates as a way to leverage yourself into a good deal. For example, one lender might have lower closing costs than the other. Ask the lender that you are working with to match or beat the other lender’s closing costs. Sometimes it works and sometimes it does not, but it never hurts to try.
Mr Paul Ho, chief mortgage consultant at iCompareLoan said, “before you try to negotiate commercial loans, know one cardinal rule, ‘businesses need to borrow when they do not need money’.”
He added: “When your business is struggling and you need additional funding to tide over a tough patch, then you will find that your access to funding is completely cut off and end up with very expensive funding.”
To negotiate commercial loans be wise to plan 6 to 12 months ahead for any potential funding needs. Even if you do not need funding now, you may want to quickly refinance your home loans for any potential equity and stand-by cash even if you do not need it now.
Remember, banks assess your credit and affordability at the point of application, so you should apply when your status is good, not when you have further deteriorated. At that time, no banks will lend you.
You should also read more about the different types of funding. If your business is profitable and you only need short term funding, but your access to bank’s working capital is temporarily cut off, then you should consider personal loans as a source.
There are many factors to consider when you try to secure local business loans, and good negotiators can always tweak terms to have an advantage.
If you have to bargain business loans be mindful that loan specialists can be your best ally. They can set you up on a path that can get you the best personal loans in a quick and seamless manner. They can also arrange for the Best Home Equity Loans in Singapore as they have close links with the best lenders in town and can help you compare Singapore loans and settle for a package that best suits your needs.
