6 secrets to negotiating the best deal on your business loan (3 of 3)

Negotiating with most lenders on your loan terms is possible if you do it right. Here are some tips for doing it right.

5. Be aware of what kind of pricing you might get. How do you know if the 2-3 banks you met with had great, average, or horrible pricing? For too many Business Owners the answer is you won’t?

CDs vs Business Loans. If you were looking for the best rate on a Certificate of Deposit the process would be pretty easy. You could go to a website like www.bankrate.com. Plug in the amount of your CD and the term you want and the website could give you a list from the vast majority of local and non-local sources who provided their data. Bankrate.com won’t give you a 100% of the banks’ CD rates but you could gather this missing banks’ info with a quick call to your favorite banks, where a Teller at the bank could read off the pricing to you. Unfortunately, business loans don’t work this way.

The answer why business loans don’t work like CDs has to do with the large amount of variables that go into determining….

1. If you’re the type of commercial loan that the bank wants.
2. How strong your loan is.
3. How aggressive do they want to be in the terms that they offer you?

For many banks to quote pricing, they would also like a face to face meeting to learn more about your company. After that they need to crunch your financials and review your credit before terms can be discussed. This traditional loan process severely limits the amount of banks you will be able to talk to.

To get a sense of this time and energy-consuming hill you need to climb, in Palm Beach County alone there are 34 different commercial banks. Who can offer you the best deals?

Not knowing this answer can be frustrating and expensive since pricing can vary so much. Case in point – recently the real estate secured SBA 7a loan product had pricing for most lenders in Palm Beach County at an adjustable rate of 6% (Prime + 2.75%). Within the County however there were two lenders that were offering a 25 year fixed rate in the 5% range and one lender in Palm Beach County that was offering a 25 yr. fixed rate of 4.75%. Not knowing what the range in pricing was for many business owners proved a costly mistake for those business owners who could have done better but didn’t and took the higher 6% variable rate.

Shameless Plug Alert ! *********** Having a general idea of which lenders can offer the best deals just got a whole lot easier with the creation of The Best Business Loans in Town www.TBBLIT.com. At The Best Business Loans in Town you answer between 20 -30 general questions and we compare your data to the data of dozens of local lenders in our data base from Indian River County to Miami-Dade County. For free you can see if anyone likes your loan request and what the best case possible pricing is. For a flat fee of $299 you can select up to 3 lenders to find out their identity. The power is then in your hands to decide if you would like to be contacted by any of the lenders, you decide. When local lenders are not available or when they are not the most competitive for a particular loan scenario we also include pricing from out of area lenders.

The service comes with a 30 day money back guarantee and a best interest rate guarantee. If you can find a better deal elsewhere we’ll pay you $100. Within 10 minutes you can eliminate weeks of exhaustive searching. End of Shameless Plug! *****************

6. Rarely take the first offer.

As we can see from the above points there is a range where loans gets priced. Normally there is a minimum acceptable pricing by a bank and then a cushion gets added to that.

This added cushion the banks add, can be used when the bank needs to offer terms that are lower than their normal pricing in order to get a business relationship they really want or want to keep.

By using the above methods in negotiating for a loan you will be in a much better position to “shrink that cushion” and get the best business loan in town. Good luck!

John Patterson CFP® is a Co-Founder of The Best Business Loans in Town and previous local Banker for 10+ years.  He is actively involved in helping businesses from Indian River to Miami-Dade County find the best deals on their commercial loans.