StudentDC Interactive

As I look at business plans, I notice that some grads try to tell the bank what terms they want for their loan – what kind of loan, how the loan package will be structured, even the term of the loan and the interest rate. I saw a business plan today that tried to tell the bank when a line of credit would be converted to a term loan. I’m not sure I understand the logic behind that. Another one stated that the borrower would pay back the loan over 10 years.

Good luck with that.

It’s about what the bank feels comfortable with and the kind of terms they usually give. For example, some banks might give you a line of credit for the whole loan, while some break it up into a term loan for startup, with a credit line. And some aren’t comfortable with credit lines; they want you to take the whole loan as a term loan (easier for the bank, and you have to pay interest on the whole amount.

Go with the flow, talk with several banks, and let them tell you. You can certainly negotiate with the bank, and try to get terms that are most favorable to you. But you aren’t really in a position to dictate, given that many banks won’t even talk with you. Just tell them how much you need and for what. Then take it from there.

It’s more important to get enough money.

Date: Tuesday, May 27th, 2008 at 9:29 pm | Category: financial questions, getting ready to practice, startup experiences, startup financing, startup loans, startup questions | RSS Feed: RSS 2.0 feed.
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