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  • Writer's pictureSabiene Münch

Negotiate purchase and credit agreements correctly

The first rule regarding credit agreements - which is mostly not followed - is: negotiate!

Negotiating makes you likeable to the business partner. When you negotiate, you are a serious, professional business partner who knows what he wants and who tries to get the best return from his project. You can be expected to negotiate good conditions with other business partners, such as construction companies and suppliers, and to carefully manage the (bank) capital at your disposal. This also reduces the risk of a bank.

That it sometimes does not work out as expected is part of it!

Some banks have already asked us afterward why our business partner was not interested in negotiating the conditions. Is there another investor? Is there really a still interest in financing?

Then we hear the answers of the borrowers: The interest rate is already ok, more important for us is the transaction security. In plain language: The main thing is that we get money at all. This raises questions...

But how do you negotiate properly?

  1. First of all, you should be clear and agree on the goal of the negotiation. Also agree among yourselves what exactly you want to achieve: Just certain conditions, transaction security, or simply see what the negotiating partner offers. Be sure to include ancillary financing costs such as processing fees, commitment interest, DD costs, extension fees, waiver fees, etc. in your calculation.

  2. Work out a fallback position in case you do not achieve the desired negotiation goal. This could be a different financing structure or a postponement of the talks by agreeing on a meeting at a later date if certain issues could be clarified by then. Never just let talks end without a result and always with a follow-up appointment.

  3. Study your negotiating partners carefully. Have they made similar deals in the past? Can your negotiating partner make decisions? What is his background? You have to negotiate differently with a business economist than with a lawyer. Try to get all decision-makers at the table. What is important to your discussion partner, which conditions are indispensable and which are negotiable? Collateral is usually not negotiable for a bank because the back office has the final say here. The amount of penalties, interest rates, fees, etc., on the other hand, is different.

  4. Expect that your contract partner will also screen you closely and be prepared for unpleasant questions. Do not hide anything, at the latest at the DD they will find all the information about you. Surprises are very unpopular with banks. With conclusive reasons, you can straighten out some issues from the past.

  5. Start with realistic maximum demands. Important realistic: The demands should be set so that your interlocutor can theoretically agree. Point out your goal and justify it, providing conclusive explanations why your interlocutor should agree to it or why certain conditions do not make sense. If the demands are not enforceable in this way - which is to be assumed - try it bit by bit. If not demand x, you could start with y and see if x is possible for the interlocutor at a later time.

  6. Keep to deadlines. If you have to submit documents later, calculate with more time and surprise your contractor by delivering much earlier than expected - this is better than having to apologize all the time. Better to adjust up than to adjust down!

  7. Prepare in writing also for follow-up appointments. How often do you forget important questions or leave a bad impression if you don't have the "numbers" right away? When in doubt, don't shoot from the hip. Behave professionally. Promise to deliver the answers as soon as possible.

  8. People know each other in the industry, never speak badly of a competitor, and count on the fact that capital providers also exchange information with each other. Often despite confidentiality.

  9. Last but not least, keep your mood good even when things get stressful. Don't take failure or a harsh tone personally. There is a lot of money at stake, and things can get heated. Ultimately, your capital partner has the same goal as you - to close the financing.

If you still have questions or need concrete support for your project, please feel free to contact us:


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