Applying for a loan is a good option for owners of small or startup businesses these days. This is because in general, the success of a company would depend on one’s access to funding.

Many entrepreneurs, however, feel that they’re at the mercy of the lender when borrowing.

The good news is that even with the current highly competitive business environment, you might be able to negotiate for a small business loan if you’re in need of one.

If you’re still having doubts about applying for a loan, here are some valuable tips you can follow when negotiating for it:

Create A Comprehensive Business Plan

Before applying for a loan, you need a good business plan. It should clearly describe your objectives and strategies for reaching your business goals.

It’s one of the critical documents a lender will carefully review before inviting you to discuss possible funding for your business.

This would apply for all types of small business loans, from credit builder loans to business term loans. 

Generally, you need to submit a business plan to a lender prior to getting an opportunity to negotiate with them.

With that in mind, you must be ready to defend your objectives and strategies. An excellent business plan should include the following:

  • Estimated startup costs
  • Analysis of profit and earnings
  • The number of employees you’ll hire
  • Applicable wages
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Happy businesspeople handshaking after deal or interview at office

Learn More About Lending Terminology 

Before starting with the loan negotiations, it’s best to know the standard lending terms.

Here are some of the common ones you might encounter during the discussion:

  • Loan principal – This is the amount you can use for the needs of your business. Once you receive any portion of this, that’s the amount you have to repay to the lender. In most cases, the principal amount might vary from the amount you applied for since during the review process, the credit that the bank is willing to provide will be decided on.
  • Default – If you check the loan agreement, you’ll find a specific clause stating conditions under which you defaulted on your loan. Although some of those conditions might not be under your control, but you’re still accountable for them. ‘Default’ means that a borrower couldn’t pay back the borrowed amount during the given period or cannot follow the loan terms.
  • Equity – The majority of small businesses hold a form of equity that can be loans from family or personal savings used to start the business. Generally, lenders are eager to know the equity you’ve invested in your industry.

Come Up With A Negotiating Strategy 

If you want an effective negotiation for a small business loan, you need a well-rehearsed business plan presentation.

If possible, seek guidance from an expert. You need to know what you want from the lender and what factors you should be ready to compromise.

The items you can negotiate include the following:

  • Payment schedule – All lenders will require a repayment schedule. Luckily, you can discuss the terms by taking into consideration your projected cash flow. Remember that some lenders might charge a fee for early payment or prepayment of a loan.
  • Interest rates – When negotiating a loan, the interest rate is one of the factors you can try to discuss in your favor. Gaining a small deduction on the percentage will allow you to save money throughout the life of your loan. Make sure you have a convincing argument as to why your interest rate should be lower. With that in mind, bring along evidence to support your claim.

In addition, don’t forget to build your business credit, which will surely come in handy if you’re going to apply for another loan soon.

Get To Know The Lender

Before negotiating for a small business loan, you need to be familiar with the lender.

Try to learn more about the interest of the lenders you’re considering, whether they’re prioritizing specific fields such as finance or covering various areas.

If your business is in an industry that your lender favors, consider it an advantage, and you can expect the negotiation to proceed smoothly.

If not, you might find yourself in an ordeal negotiating with a lender who has no experience in the sector or industry your business is in.

As a result, you need to boost your negotiation skills to convince them to help you out.

Look For A Mentor

If you’re not confident with your negotiation skills, it’s best to search for a mentor in your field for guidance.

Given that your main objective is to look for funding sources, a mentor can provide valuable insights to allow your negotiations to go smoothly.


Ensuring that your small business will be a success in the long run requires effort, which may entail getting a loan. The negotiation process when applying for a loan can be a challenging task.

However, having the right skills and utilizing the proper techniques can significantly help you achieve the outcome you want.

By trying the tips above when negotiating for a loan, you might just get the best terms for it in no time.