Line of credit, a term loan, or some other bank credit provision. If you have any one of these tied to your bank account (or plan to in the near future), take solace in these five tips to better manage your corporate debt as you scale your business.
1. Negotiate better interest rates with your lenders
Move away from the idea of being just “the applicant” and get the lenders competing for your business. Let the lender know you are surveying the market to find a financing plan that specifically fits you. The conversation might sound something like “Tom, we are in the midst of interviewing a number of banks to see who we want to work with. May we ask a few questions to see if your institution is a good fit for us?”
2. Negotiate an amortization schedule that fits you
The longer you pay off the loan, the lower the payment will be. A loan amortized over five years will require a lower payment than a loan amortized over two. A loan amortized over ten years will require a lower payment than a loan… Well, you get the point. The goal is to minimize your required payment to protect your cash-flow in the event there is a short term dip in your business. But be on the watch for hidden fees (see below).
3. Discuss eliminating hidden fees
Be mindful of the small print and negotiate strongly to eliminate (or at least minimize) hidden bank fees. Looks for things like “origination fees,” “payment processing fees,” “automatic rate increases,” and “prepayment penalties.”
4. Do not leave anything to surprise your banker – communicate
Nobody wants to be the bearer of bad news, especially to a lender, but it is better to spit out the bad news as soon as possible. Banks do not like surprises.
5. Eliminate any personal guarantees
Get rid of them at all costs. It is best to avoid ties between your private and business lives.