Negotiating With A Bank? 6 Tips To Successfully Do That!

negotiation

If you run a small business, you may face a time when you would desperately need some cash. You can resort to a bank for a loan. But negotiating with a bank is not always the same as negotiating with a traditional vendor. While persistence and patience are the common variables, you also need other negotiation skills to seal a favorable deal with a bank. 

While undergoing negotiation training will help, join your strategies with the tips mentioned below to negotiate a good deal. 

Here are tips on negotiating with a bank. 

  • Understand your business credit score 

Before approaching the bank, understand the credit score of your business. Factors like your trade experience, size of your business, payment habits, outstanding balances, and credit utilization affect the credit score of your small business. 

Study your business credit report and determine your creditworthiness based on it. Preparing in advance will help you confidently put your point in front of the authority. 

  • Know your finances

Just like your business credit score, knowing your finances put you in a better position to speak about the profitability and growth of your small business. 

Review the finances before meeting the authority and chalk out strategies for dealing with the changing business trends and recent events. Speak about your plan with authority and come straight to your requirements. 

  • Make it a barter deal 

Successful negotiations are based on a “give and take” system. To seal the deal successfully, make it lucrative for the bank too. You can do it by promising a quick cash closing and compromising on the closing date, contingencies, and type of financing. By being flexible with these variables, you put yourself in the good books of the bank. But make sure you know where to be firm. 

Determine a purchase price number and stick to it. 

  • Know your options 

A bank may put some regular options on the table, such as SBA loans, low-rate credit card offers, etc. Educate yourself on the common options beforehand. It will help you select the best possible deal. 

Also, check your current deals and associations with the bank and surf across options, like account consolidation, etc. Inquire if the bank will offer you a discount depending on the business you bring. 

  • Comply with their procedure 

As already said, banks negotiate differently than traditional vendors. The biggest stumbling block is communicating with them. Once you manage to break this barrier, your get stuck in the extensive red tape.

Be patient and comply with the procedure of the bank. As it is not similar to traditional transactions, you may have to deal with tedious documents for a long time. Scan or fax all the required documents to them or places they want you to send. The waiting time may also be longer. But do not get frustrated. Have patience and hope for the best. 

  • Know your options 

If you do not understand anything, don’t agree to it. Don’t hesitate to ask questions. Also, be open to the offers the bank has to make. 

If you are not happy with their offers, check the alternatives you have. You can contact other banks, negotiate with your creditors and vendors, use your personal funds, cut down expenses, or go for crowdsourcing. 

Keep a backup plan ready for if your deal with the bank doesn’t work out. Although, it is less likely to happen. 

The bottom line 

A financial emergency can put you under great stress. But you have multiple avenues to seek. 

Reach out to your bank and seek help. Put your negotiating skills at the table and close a profitable deal. If you are bad at negotiating, these tips will help you to go down this lane.

The views expressed in this article are those of the authors and do not necessarily reflect the views or policies of The World Financial Review.