5 Tips to Negotiate Business Loan Offers Like A Pro

Business loan are a great idea when you want to take your business forward. You can get a business loan to expand and grow your existing business, branch out your business, or refurbish your business site to attract more customers.

5 Tips to Negotiate Business Loan Offers

Once your business loan application is approved, lenders will send you an offer for the loan amount they are willing to give for your business. You have the option to negotiate the offer if it doesn’t meet your requirements.

Here are some tips you can follow to prepare for negotiating your business loan:

Establish a Strategy

The first thing you should consider is knowing your business’s strong and weak points.

When you are negotiating, think like a lender and consider their objectives. Try to focus on the strong points of your business and keep the attention away from anything that could devalue your business.

The best way to do this is to determine what terms are important to you and thus non-negotiable. Let the lender know that you are not willing to negotiate on those terms. Stick to the terms you can negotiate upon and consider what terms you are willing to give up on.

Know the Risk Profile of your Business

The risk profile of your business, especially a small business that is still growing, is the weak point that could turn the loan negotiations against you. If there are things about your business that the lender can consider risky, try to overcome those.

You can even try to offer guarantees to the lender that the weak points of your business will not affect its profits, and you will pay back the loan. It is also helpful to find the right product and lender to get the most out of your business loan.

An MSME loan scheme is ideal for small businesses still in the growth phase.

Repayment and Pre-Payment Terms

The repayment of your loan is one of the most important factors lenders will consider. You need to negotiate repayment terms based on your business profits and your income turnover.

A business loan calculator can help you determine how much EMI you need to pay for your loan over a specific tenure. Try to negotiate a longer tenure for repayment, so the repayment burden is lesser on you.

If you want to repay the loan in full before its maturity, lenders might charge a pre-payment fee. Again, you can negotiate this fee to benefit both parties.

Rate of Interest

You have to pay interest on the business loan amount you avail. When considering a loan offer, calculate how much interest rate you will have to pay and if it is within the market average.

You can use a business loan calculator to get the interest amount for the loan and tenure in your offer.

Once you calculate the interest amount, negotiate the rate with your lender and settle on a mutually agreeable rate. The interest makes up most of your repayment, and the principal is paid off when the interest payments are made.

A reduction in interest rate will decrease the amount you are paying towards interest, allowing more of your payment to go toward paying off the principal.

Pay off Debts

When applying for a business loan, lenders will consider all your existing debts. These debts will reduce your income, and financers want to determine they will not affect your loan repayment.

It is always a good idea to make sure that you repay any small debts before your loan negotiations. This way, you can show the lenders that your repayment ability is strong, and you can negotiate more terms in your favor.

Building a good credit score also helps lenders determine your repayment ability.

Conclusion

If you are getting a business loan, keep your purpose in mind and settle an amount based on your needs. Your lender might ask for collateral against the loan, so be prepared to offer such a guarantee to get the loan on your terms.

If your business is still growing, go for an MSME loan scheme to help in business development. And before you negotiate, consider the final amount you are willing to settle for, so you can negotiate your terms better.