Most entrepreneurs require a business loan to financially back them while setting up shop. Now, there are many lenders that offer business loans. However, one needs to make sure that they are getting a good deal when it comes to the loan terms. The good thing is that it is possible to negotiate with the lender while applying for a business loan.
Before speaking to a lender for getting a business loan, take a look at the following tips that can help!
- Be ready with a negotiation plan in place
Being ready with a negotiation plan can go a long way in helping the business. It is possible for the lender to get involved and influence the business’ future strategies. However, if this is not a preferable option, it is better to be prepared with a strategy that can help in securing business decisions in the future. Consider the financial components to understand which aspects are non-negotiable and which can be renegotiated at a later stage.
- Clear off any existing debt before applying for a business loan
If a loan applicant is already in debt, it might be difficult for them to take on another loan. This can lower their chances of getting a loan approval as lenders do not see this as an ideal situation for them. Ideally, it is advisable to not let existing Equated Monthly Instalments (EMIs) exceed 30% of one’s income. It is best to clear the existing debt before applying for a business loan. Borrowers who are debt-free have a much better chance of getting better loan terms when they apply for new business loans.
- Have a business plan with the internal and external risks analysed
Before negotiating with any lender when it comes to applying for a business loan, the applicant needs to be ready with a detailed business plan. The borrower should be well prepared with the purpose of their venture, their process of running the business, as well as their plan on using the funds received from the line of credit. It is also ideal to identify the internal and external risks and have a plan to deal with these risks.
- Identify the type of business loan that is most suitable
There are various types of business loans that lenders offer. If the applicant is looking for a line of credit to withdraw funds for their working capital requirements, they can opt for a loan against securities, overdraft facilities, bill discounting, etc. They can go for an unsecured business loan to meet their short-term goals or go for a secured loan against property for their long-term goals.
- Make sure to discuss payment terms to conveniently repay the loan
It is very important to negotiate payment terms that can conveniently be covered in order to grow the business. For this, make sure to understand the repayment terms and conditions offered by the lender and consider numerous plans to find one that is suitable.
Also, it is also important to maintain a good credit score. This is not just essential for getting a business loan application approved, but also for lenders to offer favourable loan terms.