5 Tips for Negotiating a Business Loan 2021

Business loan terms are often negotiable, giving borrowers a chance to secure more favorable rates and better terms.


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  • Negotiating your business loan terms can help your business get to the next growth stage more easily.
  • Your interest rate, prepayment terms and personal guarantee provisions are three important areas that you can negotiate.
  • Before heading to the negotiation table, you should know the key terminology to make the best case for your business.
  • This article is for small business owners considering borrowing money for additional funding.

You can’t start or grow your business without funding. Unfortunately, applying for and getting a business loan isn’t usually a fast or stress-free experience. On top of that, some small business owners believe that they have to take the loans at face value and can’t negotiate the terms. Thankfully, that is far from the case. So, what parts of a business loan are negotiable, and what should you know before heading to the negotiation table?

What parts of a business loan can be negotiated?


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You may assume that most parts of a business loan are fixed, but many parts can be adjusted and better tailored to your situation.

“[A customized loan] can give you the flexibility you need to move your company into the next phase of growth or take advantage of opportunities that can increase the profit and value of your company,” said Brooke Lively, founder and president of Cathedral Capital.

Here’s what you can negotiate:

Interest rate

This is often one of the most surprising negotiable terms, but you may be able to secure a lower interest rate on your business loan. Experts recommend preparing for the discussion so you can have a productive, and hopefully successful, conversation with your lender.

“Do a little research to get a sense of how low the lender is capable of going, and push for as close to that as your credit score and borrower profile will allow,” said Chris Motola, small business analyst at Merchant Maverick.

Prepayment terms

Some lenders may assess penalties for paying off the loan balance early or making loan payments before their due date. You can ask your lender to honor a smaller fee – or no fee – assessment on a loan balance payment.

Repayment terms

As you examine the section of your loan agreement that covers repayment terms, pay special attention to any fees or clauses that could make it more difficult to repay your loan. Bring these to the attention of your loan officer, and ask if anything can be done to make them more favorable for you.

“Repayment terms are the thing that’s most likely to cost you extra money or to land you in situations where you’re having trouble paying off your loan,” said Jake Hill, CEO of DebtHammer. “Plus, lenders are more likely to budge on that than the interest rate.”

Personal guarantees

Some lenders require borrowers to personally guarantee that the loan will be paid back, which can put borrowers in a difficult situation if they struggle to repay the loan. While many small business owners assume that a personal guarantee is simply a part of any small business loan’s terms, you may be able to address those terms during the business loan negotiation process.

Although these parts of a business loan can be negotiable, much of your success depends on your existing relationship with a bank. According to Lively, a bank will take all your business with that institution – including personal accounts – into consideration while you negotiate a business loan.

“The more the banker understands you, your business model, your level of industry and business knowledge, and your ability to verbalize where your business is going, the easier it will be for them to help you find the terms that are right for you and your business,” Lively said. “We always suggest working with a smaller regional bank where you can get to know your loan officer and other employees at the bank. They are your best spokespeople and advocates when your loan is in front of the loan committee.”

Key takeaway: You may be able to negotiate your interest rate, prepayment terms, repayment terms and personal guarantee provisions with your lender.

5 tips for negotiating a business loan


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Applying for a loan is one of the most crucial steps for a small business owner. To give yourself the best chance of getting approved, follow these tips for negotiating a business loan.

1. Do your homework and go to the right banks.

Alex Espinosa, SBA lending consultant and founder of BOLD Lender, recommends researching banks before you apply for a loan. Like doctors, banks have specialties. You should find banks that are able to help you – don’t waste your time applying to banks that can’t.

“Some banks are good at restaurant loans and some are good at gas station loans, but many lenders reject those categories,” Espinosa said. “I would start by looking up every bank headquartered in my county and begin investigating them, starting with the smallest. A good place to start is on the FDIC website.”

BJ Lackland, co-founder and CIO of IBI Spikes Fund, suggests seeking capital from multiple sources. “In any negotiation, it helps to have options,” he told Business News Daily.

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