Sara Routhier, Managing Editor and Outreach Director, has professional experience as an educator, SEO specialist, and content marketer. She has over five years of experience in the insurance industry. As a researcher, data nerd, writer, and editor she strives to curate educational, enlightening articles that provide you with the must-know facts and best-kept secrets within the overwhelming world o...

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Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He also has an MBA from the University of South Florida. ...

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Reviewed by Joel Ohman
Founder, CFP® Joel Ohman

UPDATED: Feb 25, 2021

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  • Negotiating favorable terms for your business loan could really help your business grow and thrive
  • It is important to keep in mind that only certain facets of a business loan will be negotiable; educate yourself beforehand on what parts are negotiable and which aren’t
  • Preparation goes a long way; take the time to get to know your lender, the terms lenders use, and exactly what you need for your best chance at successful business loan negotiations

If you want to learn how to negotiate a business loan, you need to take the time to prepare yourself. A business loan could be the difference your business needs to take off and grow.

However, if you don’t prepare and you’re not ready for negotiation, you might not get a business loan, or you may get a loan with unfavorable terms.

The important things that you need to know are what facets of a business loan are negotiable and the ways you can improve your chances in a business loan negotiation. We’ll explore these topics below.

If you’re ready to compare business loan interest rates in your area, enter your ZIP code above to start getting business loan quotes today.

How can I negotiate a business loan?

You may have heard business loan horror stories from peers, friends, or family members. If you do not prepare yourself for negotiation or understand what you need financially, you could end up regretting the business loan that you sign.

If you really want to negotiate the best possible business loan, you need to take the time to prepare. We’ll go over what you should know and how you can use it to your advantage while negotiating a business loan.

This is less about how to negotiate or to offer tips for negotiation and more about informing you about what you can and can’t do.

Along the way, you can use these insights and turn them into tips for negotiating so that you can get the best possible business loan.

If you’re interested in more business loan information, you check out Nolo’s free resources on the subject as well.

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How should I prepare for business loan negotiations?

In all honesty, preparation is the most important step in negotiating a favorable business loan. Too many people do not take the time to prepare themselves, and as a result, they find themselves with less than favorable business loan terms.

How should you prepare to negotiate a business loan?

First, you need to research lending institutions. Lenders will do a lot of research on you when you apply for a business loan.

You need to take the time to understand them as well. Some lenders will cater themselves more to what your needs are than others. You need to know this.

You don’t want to go into a bank or credit union and waste your time by applying for a loan that they will not approve. Depending on your business, how much money you want to borrow, the best lender for you will vary. Do your research and keep your options open.

Second, it is good to familiarize yourself with the terminology that lenders will use.

It can sometimes seem like they are speaking another language, but if you take the time to understand the terms being used, you will be able to hold a fluent conversation and help negotiate better terms.

Finally, you need to prepare your financial statements for both your business and personal accounts. Make sure your proposal is neatly typed and error-free.

Show the lender that you know exactly how much money you need to borrow, what it will be used for, how it will help you earn more money, and how you plan to pay back your loan.

People with clear, concise plans have an easier time getting good business loans because they were prepared, they understood what they needed, and they worked with the right lender.

What facets of a business loan are negotiable?

If you want to be successful in your business loan negotiation, you need to know what facets of a business loan are negotiable. Here are the key features of your business loan that you will be able to negotiate:

  • interest rate
  • prepayment and repayment terms
  • personal guarantees

We’ll take a look at what you should keep in mind while negotiating each of these facets.

How can I negotiate a lower interest rate on my business loan?

Once again, preparation is key. Understand the lender you are negotiating with. Research the lender and how low they are able to go in terms of the interest rate.

Use this information combined with your credit score and borrower profile to push for an interest close to the lowest rates the lender offers. If you don’t prepare and do research, you won’t know how low your lender can go.

What should I keep in mind with business loan prepayment and repayment terms?

Did you know some lenders assess a fee or penalty for paying off debt early? Speak with your lender and see if you can get them to waive this fee. It can help you pay off your loan in a timelier fashion.

The repayment terms of your loan are probably the most important aspect of your loan. Repayment terms are where a lot of people get in trouble with their business loans.

Make sure you understand the terms of your repayment and make sure there are no sticky points that could cost you money or pose difficulties for you down the road.

Should I give a personal guarantee on a business loan?

If you can avoid giving a personal guarantee on your business loan, do so. Personal guarantees allow lenders to go after your personal assets or finances should your business fail to pay off its loan.

It is best to keep your business and personal finances and assets separate.

You may have no choice but to give a personal guarantee. If you have no choice, make sure your personal guarantee is very limited to decrease your risk exposure.

If you’re ready to apply for a business loan, enter your ZIP code below to compare business loan rates in your area.