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Rich Best has spent 28 years in the financial services industry, as an advisor, a managing partner, directors of training and marketing, and now as a consultant to the industry. Rich has written extensively on a broad range of personal finance topics and is published on several top financial sites. Recent books include The American Family Survival Bible and Annuity Facts Revealed: What You MUST Know Before You Invest.

Negotiating Tips for Getting a Business Loan

Negotiating Tips for Getting a Business Loan

When negotiating a business loan, the outcome is largely determined as a result of preparations made by business owners prior to applying for the loan. The key to getting to “yes” on a business loan is to prepare well ahead of your anticipated needs. A major component of that preparation is to develop a business plan that explains precisely how your business will generate the revenue needed to repay lenders or investors.

Here are five steps business owners need to take that will put them in a much stronger position when negotiating loan terms:

Build a solid business plan. Lenders want to know about your products and services, your employees’ expertise, your current financial position and projected cash flow, your marketing plans – everything required to effectively evaluate whether lending capital makes good business sense to the lender. Your plan should answer the key questions lenders have about your business, such as:

  • Can your business be profitable enough to repay the loan?
  • Who is your target market and is there enough demand for your product or service?
  • Are there solid strategies in place for manufacturing, marketing and delivering your product to market?
  • Does your management team have the competence and experience to execute the business plan?

The purpose of your business plan is to instill confidence in the lender that your business will be a money-making machine for both of you. It is also your most important tool for rallying your management team and employees around your mission and the strategies for achieving it. If you need to hire a business consultant to help you prepare it, consider it a very worthwhile investment.

Find lenders who truly understand your business/industry. Network with groups in your trade or industry. Look for referrals from other, similarly situated businesses who have been there and done that.

Ride a rising tide. You strengthen your negotiating position when your industry or market sector is doing well. Lenders are more confident about your business potential when your market sector is thriving.

Be open and transparent. A solid relationship with a lender can only be developed through forthright communication. Be honest about your business’s strengths and weaknesses. But, when you disclose any weaknesses, have a plan for how you expect to overcome them.

Get your personal financial house in order. Most lenders require collateral for business loans. If business assets aren’t sufficient, they will look to personal assets and some may require a loan guarantee from the business owner. Your own personal balance sheet, in addition to your credit standing, are strong indicators of your ability to manage debt and will be a factor in approving your loan.

Don’t wait until you actually need the money. There is no worse time to negotiate with a lender than when you are desperate for capital. With a solid business plan, you should be able to anticipate capital needs well in advance and begin preparations early. Most business owners need a capital infusion at some point, so it makes sense to start a relationship with a business bank now. They are always interested in starting new relationships and, a good business bank will be happy to provide guidance along the way.


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