Experienced retail executive Michael W. Kramer is the CFO of global fashion e-commerce company Forever 21. In this position, Michael W. Kramer is in charge of finance and has helped the company facilitate $500 million in asset-backed loans with very favorable terms from top lenders.
Here are two tips smaller-scale business leaders can use for negotiating better commercial loan terms:
- Understand the terms completely
What terms is the lender offering? Is the interest rate fixed or floating? What are the consequences of breaching the contract? Are there penalties for late payments? What can and cannot be used as collateral? What are the associated fees and costs of the loan? Often, lenders are willing to step back on one or more of these terms if you negotiate. Know the terms and then negotiate specifics for a more business-friendly loan. You may also want to check out loan alternatives such as lines of credit, short-term notes, and weighted average-term notes. One of these means of accessing capital may be just what you need.
- Make your business’ banking part of the offer
Inform the lender that you are willing to move your banking relationship to it if you are granted a commercial loan with good terms. Arm yourself with copies of your monthly account and credit card statements when you are negotiating with the loan officer so he or she sees the value of developing a long-term relationship with you. The deposits, fees, and commissions your business will bring may be very appealing.
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