How you negotiate the best deal is a combination of carrot and stick. Don’t just think it’s about trying to squeeze the bank to as low as possible an interest rate, sometimes you’ll get the rate even lower if you play “hard to get” and make them chase you. But to do that best, you need to make yourself as attractive as possible:
The bank can make their money somewhere else. If you have other bank facilities like transactional banking, credit card or leasing then you are more valuable to the bank. Make sure you make a detailed case for all the other facilities you plan to utilise over the next 12 months.
Demonstrate your network. If the banker feels that you will be able to introduce them to other new clients, then they definitely want to buy your business. No matter your business size or industry, don’t underestimate the network you may have. Your accountant, lawyer, clients, suppliers, clubs, friends or family are all potential leads for your banker.
The right client. Different banks have different strategies of growth and to match their growth strategy chase certain industries harder than others. Learn which bank want to deal with your industry and you are one step ahead. And don’t forget to look outside the big four, many second tier banks chase certain industries even harder.
Get referred. Banks will sometimes give clients of referral sources a better deal to encourage the referrer to continue to send them more business. This a clear economies of scale issue, no matter how small you may be, being a part of a larger group makes negotiating that much easier.
It’s a people thing. Commercial and business finance is very much a relationship game with a decent level of individual discretion. Do you ever find yourself giving the clients you enjoy the company of or like a bit more, a better deal? Well, in banking it’s no different.
Last tip, these negotiations are not a onetime thing, you need to stay on top of this as much as you stay on top of all of your other supplier prices. Most banks do annual reviews on the facilities they provide, use this as an opportunity to make sure you are still getting the best deal possible.
All too complicated?
Running a business is hard enough, if you want some advice on you can get the best deal, feel free to contact us.
How to get the best interest rate on your business and commercial loans
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