Debt Syndication – The Borrower’s Dilemma

Taking a loan is never an easy task. Banks in India are still considered sacrosanct and whatever they say is taken as seriously as the line of law. In such a situation, where the businessmen think that I need money, so I must say yes to all terms & conditions becomes the most logical conclusion.

However, we at ProBizAdvisor say that, “times are changing”. With proper expertise and experience, tables can be turned. So, what are the aspects of a loan which can be negotiated with a bank? Are there any specific bank loan negotiation tips? Well, everything under the sun is negotiable, but when it comes to a bank following points could be considered:

1. INTEREST RATE:
For most people who haven’t found the right set of experts, fund raising, whether equity or debt can be quite daunting. They fail to understand a simple fact that it is an expert role. Like how a family doctor cannot perform surgery, a normal CA or a consultant cannot do an effective fund raise.

2. SECURITY / BANKING LIMIT:
The security provided to the bank for the money that they give is also a critical factor. If you give away all or most of your assets in the first round itself, you hardly have any further borrowing capacity left. The banking limit you get is a function of the security that you offer. Even limits, in conjunction with security is negotiable.

3. PERSONAL GUARANTEE:
These days, personal guarantee of promoters / directors has almost become a mandatory condition for any loan. But very few people know, that a bank cannot force the senior management provide personal guarantee on a loan document, if presented properly.

4. PROCESSING FEES:
This is one factor which appears very small compared to the loan amount coming your way. However, in absolute terms, it becomes good point to negotiate. Banks can either waive off or reduce it substantially on their discretion.

The idea here is not to squeeze the bank but to create a long-term win-win relationship based on mutual trust and fairness to both the parties. It helps the business to have enough flexibility to operate eventually. Banks also appreciate clients with inside knowledge, since it is easier to deal with them. ProBizAdvisor helps you to raise funds and get good deals with banks based on its relationships. You can contact us for more details.