Deciding to renegotiate your loan

Deciding whether renegotiating your business loan makes sense for your business, is the first thing one should think before approaching the bank. If renegotiating a loan will still not help your company to overcome the difficult situation, there is no sense beginning the process. Buying time is not a viable reason to approach the bank with a workout plan. Review your company’s financials to understand if a lower interest rate or a grace period will be enough to save the loan. If not, it may be time to face reality..
If there is a possibility that the loan can be kept current under new loan terms, the best time to approach the bank is before the company falls behind in loan payments. Bankers will not be happy to hear that you have financial troubles, but they would rather be told before your loan is 30 or 60 days or more past due and their telephone calls to the company go unanswered.
Contact the bank to discuss the company’s situation before they begin to mail past due notices and threatening letters.
Prior to meeting with the banker, the  company must prepare materials that show how the business will meet its current and future financial obligations: financial and marketing data, short-term (3-6 months) and long-term (up to 3 years) cashflow projections, a business plan etc. The company must explain why the current financial difficulties exist and present a realistic game plan to convince that the difficulties will be fixed and not recur.
Do not come to the negotiating table ready to accept any modified terms offered by the bank. Accepting terms that will not really help your company to overcome the trouble, but only postpone the unavoidable, is of no value.  Specify, as early as possible, the new loan terms that will enable your business to repay the loan on time. Know in advance what will work and what will not. Once you are well prepared, arrange the meeting with your bank.


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