Tips for Getting the Best Loan Structure

We last covered loan structuring. Today, let’s have a look at some tips to get the best possible loan structure. A lot of this is a dialogue between you & the lender you’re working with. You’ve got to figure out what you’re comfortable with in terms of repayment, amount of collateral, and any other requirements from the lender. There’s always going to be some give & take, though, so don’t feel obligated to just take whatever is immediately offered.

Tips for Successful Loan Structuring

Understand Your Needs

Clearly define why you're taking the loan and how it will be used. This will help you communicate your needs effectively to the lender.

Negotiate Thoughtfully

If certain terms don't align with your business's needs, negotiate with the lender. Some terms may be flexible based on your creditworthiness and relationship with the bank.

Factor in Cash Flow

Choose a repayment term that aligns with your business's cash flow. Make sure the monthly payments are manageable and won't strain your finances.

Analyze Interest Costs

Consider the impact of the interest rate on your total loan cost. A slightly lower interest rate can lead to significant savings over the loan's term.

Assess Collateral

Understand the collateral requirements and implications. Be prepared to offer collateral if required and ensure its value aligns with the loan amount.

Review Covenants

If the loan includes covenants, make sure you understand them fully. Ensure you can realistically meet these conditions to avoid default.

Plan for Prepayment

If you anticipate the ability to repay the loan early, discuss prepayment options with the lender. Factor in potential penalties and fees.

Get Professional Advice

Consider seeking advice from financial advisors or consultants to ensure you're making informed decisions about loan terms.

Read and Understand the Agreement

Review the loan agreement thoroughly before signing. If there's anything you don't understand, seek clarification from the lender.

Things to Remember

It’s worth noting that you can compromise a fair bit on the loan structure in most instances. However, it’s also worth noting that haggling with the lender doesn’t always mean you’ll get everything you want and that might not change from one lender to another. Loans are somewhat of a commodity product, in our opinion. You can customize, but you probably won’t be able to radically alter some things, especially if government regulations are concerned. We’ll work with you to find the right lender who can handle your particular circumstances.

*Not financial/legal advice