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Small business loan negotiation with bank?!
Posted on 3/16/15 at 8:42 pm
Posted on 3/16/15 at 8:42 pm
Applied for a small business loan through my bank. Originally asked for 200k and they ( bank and sba) "countered" with 112,500 term loan and a 50k line of credit. I had no idea that they would negotiate. I thought it was a yes or no! Anyone have experience with this? Is this negotiable? Not sure their offer will work for me especially how it's structured.
More info: sba is the backer for the loan. Loan will be handled through local bank.
More info: sba is the backer for the loan. Loan will be handled through local bank.
3
Posted on 3/16/15 at 9:07 pm to DzNtz
From the info given, looks like they want you to come up with about 20% cash to put in the deal, not unusual with business loans....."we believe in your dream, do you?"
Why they split it up into a line of credit, probably has to do with the line of business you are in, probably to help with inventory
Why they split it up into a line of credit, probably has to do with the line of business you are in, probably to help with inventory
Posted on 3/17/15 at 5:59 pm to Tigerpaw123
I wish they would have explained it so succinctly. Makes sense. Thanks.
Posted on 3/17/15 at 6:22 pm to DzNtz
do you have any collatarel?
try www.thesba.com
try www.thesba.com
Posted on 3/17/15 at 6:54 pm to DzNtz
I prefer having a line of credit for my company. Allows me to draw and pay and draw again if needed. It's much more flexible and I'm able to use it in a way that keeps me from paying interest.
Posted on 3/17/15 at 7:39 pm to VABuckeye
I don't mind the line of credit once a positive cash flow has been created, but we are opening a second store in a new city and want to have the cash as well. I don't think it will be a problem, just surprised me a little bit. We will have to purchase the inventory to stock the store and have it selling asap. Makes me nervous.
Posted on 3/17/15 at 8:06 pm to DzNtz
quote:
Makes me nervous
It should, anytime you can get into a new biz and not be nervous, it is a bad thing , if it is a sure thing, more times than not it is surely to fail
This post was edited on 3/17/15 at 8:08 pm
Posted on 3/17/15 at 8:07 pm to DzNtz
The bank isn't so much "negotiating" with you as much as they are telling you what they will lend.
Was 200K all you needed? Or is that after putting up some of your own cash?
When we expanded our family business to a second location, we went with a local bank who gave us a package backed by the SBA. We estimated the total cost needed to open at 125K. They gave us a LOC with a 9 month drawing period. However, we could not access the LOC until we showed them 25K of receipts for expenses we paid with our funds. No interest accrued during the 9 months. At the end of 9 months, the LOC converted into a traditional loan. The first year was interest only, followed by a 9 year amortizing loan at I think it was around 4 percent. We ended up only using about 92K of the LOC availability.
Was 200K all you needed? Or is that after putting up some of your own cash?
When we expanded our family business to a second location, we went with a local bank who gave us a package backed by the SBA. We estimated the total cost needed to open at 125K. They gave us a LOC with a 9 month drawing period. However, we could not access the LOC until we showed them 25K of receipts for expenses we paid with our funds. No interest accrued during the 9 months. At the end of 9 months, the LOC converted into a traditional loan. The first year was interest only, followed by a 9 year amortizing loan at I think it was around 4 percent. We ended up only using about 92K of the LOC availability.
Posted on 3/17/15 at 8:12 pm to DzNtz
Don't forget to check out a few smaller community banks, they may not offer the lowest interest rate, but may be more willing to work with you in terms
Posted on 3/17/15 at 8:27 pm to LSUFanHouston
Switch a couple numbers and this is what I am looking at with the loc turning to term loan. I guess it's more normal than I thought.
Thanks guys.
Thanks guys.
Posted on 3/17/15 at 11:04 pm to DzNtz
Could be a number of reasons. Because it's sba I doubt it's due to collateral coverage? But it's could be....
It also may be that your debt service coverage couldn't handle the full 200?
What's the terms on the bigger loan amor/term?
Is this an express, 7a or 504 sba loan? Or some other product?
If I was you, I would simply ask the banker the reasons for their structure. There is no reason their proposal should be a secret from you. Have them help you understand.
It also may be that your debt service coverage couldn't handle the full 200?
What's the terms on the bigger loan amor/term?
Is this an express, 7a or 504 sba loan? Or some other product?
If I was you, I would simply ask the banker the reasons for their structure. There is no reason their proposal should be a secret from you. Have them help you understand.
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