Your Bank Negotiates Like a Car Dealer

The bank loan officer

A car dealer requires you to negotiate with a phantom. The Sales Weasel at the dealership takes your offer to the Sales Manager for approval. After slipping behind the curtain to speak to the Great and Powerful Oz, the Sales Weasel comes back to you with a counter offer. You never get to deal directly with the phantom Sales Manager. This allows the dealership to play games. For instance, counter offers can be presented as “final”. If the prospect gets up to walk away, the Sales Weasel can implore the customer to wait for one more minute while he appeals to the Sales Manager to close the gap.

Banks work the same way. Everything has to be run past the mysterious Loan Committee – or perhaps some out-of-town VP who has the authority to bless loans of a certain size. The bank is not doing this to play games, but it does make it difficult to negotiate every point you want to negotiate. Especially if the deal to be financed has a short time-line.

When I am involved in a loan placement, at the very first meeting I ask for the chain of command (Org. Chart) right up to the President. I ask for the names of Loan Committee members. At some point (usually at a Senior VP of Commercial Lending) the chain of command intersects with the Loan Committee. That is the guy you want to negotiate with. He or she will still use the line, “I have to run this by the Loan Committee”. But, crafting the deal with one of the Loan Committee members is better than crafting the deal with a lowly Sales Weasel.

And remember, after you reach an agreement with the Loan Committee, the second round of negotiation starts after you receive the first draft of the loan documents.