Entering into lending agreements is a great opportunity for startups as it will provide access to capital to grow your business. Once you have identified a lender, a facility and are in the negotiation stage, pay close attention to these four critical areas:
- Be prepared to produce forecasts. Which show your expected financial path into the future as these are used to determine eligibility.
- Negotiate the terms of the loan to maximise the value to you. This includes terms such as how long the loan is for, any interest free periods granted, interest rate as well as personal guarantees.
- Negotiate the fees. Loans have various fees such as original fee, processing fee, early payment fee and all fees are negotiable.
- Manage the due diligence process. This is a detailed assessment of your business which the lender will do. It is important to manage this well so that you don’t lose the financing.