July 09, 2021
How to Negotiate Better Business Loan Terms
The good news is business loan terms are negotiable. You can work with the lender to modify your terms and improve the loan. In this post, we'll explain how term loans work and how you can negotiate small business loan terms that best fit your working capital needs.
What is a Business Term Loan?This type of financing option is provided to small business owners seeking lump sum financing. Essentially, you'll receive a loan amount which you'll be required to repay in a set term. Some business owners seek shorter terms so that they can repay their balance quickly. However, other business owners prefer long term loans, which they can repay over the course of several years. In the section below, we'll dive deeper into specific terms that business owners can attempt to negotiate.
Business Loan Terms You Can NegotiateThere are several business loan terms that you may be able to negotiate including:
- Interest Rate: Believe it or not, you can negotiate your interest rate and secure a lower one. This can potentially save you thousands upon thousands of dollars over the life of your term loan. Of course, a higher credit score is more likely to land you a lower interest rate.
- Prepayment Terms: Some lenders charge a prepayment penalty for borrowers who repay their loans early. If you have plans to pay off your loan before the term is up, you can negotiate a smaller fee or no fee.
- Repayment Fees: Take a close look at the fine print behind your repayment terms. You may negotiate any fees like the origination fee or processing fee that may make it more difficult for you to pay off your loan.
- Personal Guarantees: Some business lenders will require that you personally guarantee you’ll repay the loan with your own personal assets if necessary. You may be able to address the personal guarantee while you negotiate your loan terms.