Many companies believe that they cannot negotiate with a banker. If you are looking to switch banks and have asked for a loan, the bank will due their analysis of your business and then come back, if they like your business with an offering memorandum. This is not a final offer, often there is room to negotiate. You may be able to negotiate the size the number of guarantees, debt to equity ratios, even the interest rate and some of the definitions used in the calculations. You may not get large concessions but if you have approached a new bank and they want your business, they will look may be willing to negotiate. On some items, they may not be willing to make much of a concession – usually interest rates but if you do not ask, you do not get.
Many banks are the same way, they ask for the moon and if you give it to them, they are happy. If you say no, they may rethink their position. Be careful on the execusion of the loan agreements. I have a client who applied for a loan to build a building. I did not see the legal agreements until after but the bank made the loan to the operating company who in turn had to lend it to a sister company who was building the new facility. The monthly mortgage payments came out of the real estate company even though the legal borrower was the operating company. This agreement made the financial statements a mess because there were multi million loans between companies to transfer the money to the company who needed the cash. The owners of the company could no longer can understand their financial statements. Another case I saw recently, a company purchased a building and the banker got the operating company to co-sign the loan with the company acquiring the property. Unfortunately, the operating company’s bankers looked at the loan and were upset. The new loan made the operating company default on its loan position because the bankers include 100% of that co-signed real estate loan in their debt to equity ratio. We went back to the bank and asked for amendments, reduction of guarantees and we received everything we asked for. The bank knew that they got too much coverage and should not have asked for the additional loan covenant but they were of the position that if they did not ask, they did not get.