While it's tempting, you shouldn't just pick the lender that offers the lowest total cost. Instead, consider:
- the lender's size and ability to meet future needs
- the lender's knowledge of your business
- the lender's speed at making decisions (especially when obtaining a line of credit or other financing that must be renewed)
- the loan officer's status in the organization and the frequency with which loan officers change
- the costs and commitments imposed, for example, compensating balances, which some practices prefer not to maintain
- the lender's flexibility in responding to special requests, such as foreign letters of credit.
After you've found a lender, prepare to negotiate. Each party seeks an advantageous position, and the terms can influence whether the lender will fund your project. Here's what's negotiable:
Gary I. Glassman, CPA, is a financial consultant and partner with Burzenski and Co. PC in East Haven, Conn., and a Veterinary Economics Editorial Advisory Board member.
- the total loan amount
- interest rate and fees
- loan term
- repayment schedule
- amount and type of collateral
- restrictive covenants
- acquisition of additional insurance on the life of the owner, key manager, or guarantor
- periodic financial reporting and the extent of accountant involvement.