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Tata Capital > Blog > Loan for Business > Useful Steps on How To Negotiate Business Loan Offers

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Useful Steps on How To Negotiate Business Loan Offers

Useful Steps on How To Negotiate Business Loan Offers

Availing of a loan is an excellent way to meet the short and long-term needs of your growing business. Usually, loans for businesses require minimal paperwork and are approved and disbursed swiftly.

But did you know that you can negotiate preferential loan terms before finalizing business loan offers? Yes! Read on to find out how.

Assess the risk profile of your business

By performing a thorough SWOT analysis of your business, you can identify any weaknesses or threats that may make you a high-risk candidate for a loan. Try to pinpoint and eliminate the issues that can potentially harm your prospects.

Now, sort out the income statements, cash flow statements, and balance statements and craft a detailed proposal stating the loan purpose before approaching your lender for a business loan.

Establish a negotiation strategy

  • Before negotiating with your lender, highlight the strengths of your company to improve your business loan eligibility. Pay off pending liabilities or existing loans before applying for a new loan.
  • While finalising a financial arrangement, divide your concerns into three categories: negotiable, non-negotiable and what you can pass up easily. Usually, the following aspects of a loan are negotiable- interest rates, repayment terms, and pre-payment terms.

Additional Read: How to choose the best loan term for your business needs?

Negotiate the interest rates

Your CIBIL score, annual turnover, revenue and profits, and company tenures can impact your rate of interest. To get favourable business loan interest rates, take the following steps:

  • Maintain a healthy CIBIL score. A CIBIL score greater than 700 proves your creditworthiness. To increase your credit score, maintain a stellar repayment record by paying your credit card bills on time, clearing your outstanding loans, and rectifying any mistakes in your CIBIL report.
  • A profitable annual business turnover can also boost your eligibility and get you lowered interest rates.
  • Ensure that your business shows a positive growth trend, at least for the past few years.
  • Make sure your business has a spot-free record of handling and repaying credit.

Negotiate repayment terms

First, use a business loan EMI calculator to evaluate how much EMI you can comfortably pay. Now, compare the EMIs for multiple lenders on different interest rates, tenures, and loan amounts and opt for the suitable one. By calculating EMI, you’ll smartly plan for future finances considering your repayment schedule.

Besides, carefully examine the lender's repayment terms and conditions, and check for extra, hidden charges. Understand if these can be reduced or waived off.

Review the pre-payment terms

Some lenders may levy penalties for paying off the loan balance prematurely or making EMI payments before their due date. Ask your lender about all pre-payment and foreclosure charges and understand the early loan repayment costs.

Additional Read: Top Things Lender Considers While Sanctioning a Business Loan

Your turn

Now that you know the nitty-gritty of negotiating loan terms, it’s time to approach a credible lender. Tend to all your business's financial needs with Tata Capital. We offer business loans at affordable interest rates, flexible repayment terms, and extended loan tenures. Choose a suitable EMI plan and repay over a loan term you are comfortable with. Visit our website to know more.

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