How To Negotiate Business Loans For Startups
Obviously, if you have followed us over time on how to raise funds for your startups, you will find out that we have always placed loans as an option and an alternative that should be explored but one thing we have never said is that loans are the best options for you. Now, if you should take loans, which is advised in the event that other options fail, you must, as a matter of fact, understand how to negotiate business loans for startups.
You must understand the intricacies and extrinsic procedures. You must be ready before applying so as to get the best of deals.
There is no alternative to getting the best deals if you want to negotiate business loans for startups. If you get it wrong, your cash flow will be affected and there will be consequences.
It is one thing to apply for a loan and it is another for the loan to get approved. Sometimes, you do everything right and you are still denied but doing everything right increases your chances of getting approved.
We have outlined three standard ways or tips you can employ when you want to negotiate business loans for startups. It is our belief that you won’t get it wrong. Let us get to it.
Hold on a second; have you heard of Sumo bank? Well, Nigerians who are about to run startups should be happy because there is a plan in place to provide you with the necessary loans and business coaching needed to run your startup by seasoned entrepreneurs and seasoned coaches. We will revisit this at the end of this work. For now, let us teach you how to negotiate business loans for startups.
Tips on How To Negotiate Business Loans For Startups
You must do your homework and visit the right banks
The kind of startup your running will determine the kind of bank you will visit for your loans. That is what you must bear in mind when it is time to negotiate business loans for startups. If you are running an agricultural startup, you are better off at the bank of agriculture.
The other commercial banks and the bank of industry (BOI) can handle all other loans. You will have to take your time to look up the banks that will be receptive to your proposal as that will fasten your application.
Related: Need a loan? Here is how to apply for small business loans in Nigeria
If you are in the United States, you can check out the FDIC Platform. According to Alex Espinosa, “Some banks are good at restaurant loans and some are good at gas station loans, but many lenders reject those categories. I would start by looking up every bank headquartered in my county and begin investigating them, starting with the smallest.”
2. Understand the terminology
There are terms for everything. There are marriage terminologies, health terminologies, agricultural terminologies and indeed in everything. Getting a loan also has terms that you should be conversant with. So, part of the preparations to negotiate business loans for startups is getting acquainted with the right terms.
If you want people (bankers and lenders) to take you seriously, you will have to flow with them and you can only do that when you have an understanding of what it takes to take a loan. It is not just enough to know the terms; you must know what they stand for and how they will affect you.
According to Paola Garcia, “Speaking the same language as your lender demonstrates that you understand the process and your responsibilities, increasing your lender’s confidence in you. This can also help you spot warning signs that a potential lender may not have the experience you need or may demonstrate predatory lending behaviors – either of which can result in a loan that’s poorly structured, with repayment terms that jeopardize your business’s cash flow.”
Some of the terms include Balloon payment, default, financial covenants, loan-to-loan ratio, and personal guarantee. I expect you to understand these terms and more terms that are related to loan application and collection.
3. You must be prepared (packaging)
In our present dispensation, the packaging is everything. It is part of your preparation and it must be legit. How you dress is how you will be addressed. Do you remember how to prepare for examinations? There is really very little or no difference between them. You need to pass and you need that money to grow your business.
Your packaging does not end in the way you look but it also goes to include the paper works you are presenting to the lending company.
More so, you are to remember the financial reports and your tax returns.
According to Espinosa, “You should prepare a personal financial statement listing your income, assets, and liabilities. Have copies of up to six months of bank statements, recent broker and retirement account statements, copies of your life insurance policy and statement, any trust information, and any recent appraisals you have had done.”
In the final analysis, the kind of preparations you have will determine the kind of reception you will receive at the bank or any other institution that you will properly use. Therefore, make sure that the preparation is legit and standard.
Before you will say I forgot, I didn’t ooo. There is a platform known as Sumo Bank and it will provide you with the best way to start and fund your business. You will find details about it here. Everything you need to know is contained there. Thank me later.