Negotiating Better Loan Terms: What You Can Change and How to Ask

Most business owners accept the first loan offer they receive, but nearly every aspect of a loan is negotiable. Understanding what you can negotiate and how to approach these conversations can save you significant money and create more favorable repayment conditions.

What is Negotiable

Interest rates are the most obvious negotiation point, but do not overlook other critical terms. Repayment schedules can be adjusted to align with your cash flow patterns. Prepayment penalties can be reduced or eliminated, giving you flexibility to pay off the loan early if circumstances improve. Collateral requirements might be negotiated if you have strong financials or can provide alternative security.

Building Your Negotiating Position

Lenders negotiate with borrowers who demonstrate creditworthiness and have alternatives. Get pre-qualified with multiple lenders to create competitive tension. Present a strong business case with solid financials, realistic projections, and a clear repayment strategy. Demonstrate your understanding of the market by mentioning rates and terms you have seen elsewhere.

Timing Your Negotiation

The best time to negotiate is after approval but before signing. You have leverage because the lender has invested time in underwriting your application. Be professional and collaborative rather than adversarial—frame requests as seeking mutually beneficial terms rather than demanding concessions.

What to Say

Use phrases like "I am very interested in moving forward, but I would like to discuss the interest rate" or "Could we explore adjusting the repayment schedule to better match my seasonal revenue patterns?" Specific, reasonable requests based on business needs are far more effective than general demands for better terms.