By Younas Chaudhary
America has a mature and reliable lending system that has helped immigrants like me to succeed as entrepreneurs in this wonderful country. I was pushed against the wall by hostile investors during the mid-eighties, but a bank lender held my hand, trusted my vision, hard work, and skills, and gave me a chance to prove myself, enabling me to buy out my investors and turn a problem loan into an opportunity.
Today, our team deals with lenders in the energy and real estate sectors, and we thrive due to the robust American banking system. The following are a few takeaways I’d like to share with you about dealing and negotiating with lenders:
An essential part of dealing with lenders is to “just be you.” Be authentic, be who you are, and be transparent. Our business does not run smoothly all the time, as we often face obstacles and hurdles. But in times of difficulty, our consistent approach has been to give lenders the honest facts, so that together we can address and fix whatever loan-related issues have arisen on account of bad timing, poor financials, etc.
Whenever we face bumps in the road related to loans, extensions, loan payments, terms, and so forth, we have to be upfront with the lenders in plain language. We need to let them know that “This is what we can do, why, and how; and this is what we cannot do, and why.”
Our team negotiates with lenders concerning interest rates and key financing terms, and in doing so transparency is our touchstone. We go through the intricate details of loan documents and financing before signing the documents. We ask lenders reasonable questions and secure clarifications before signing loan documents. Our due diligence efforts have helped us establish a credible track record and gain the lenders’ trust.
I’ve long felt that most lenders will work with you as long as you walk the walk and stick to your core principles of honesty, forthrightness, and transparency. I try harder with the help of our team to tightly watch and control all our costs and reduce unnecessary expenses, irrespective of whether current oil prices are at $40 a barrel or more. Our foresight in identifying business opportunities and prudent financial management have helped us consistently stay in business for over four decades without ever filing bankruptcy.
Our historic strategy has been to own assets with solid reserves in mature fields and good locations. We are fortunate that our lenders have worked closely with us to analyze the market scenarios and offer deferred payments, extensions, and other breaks in response to volatile energy demand and lower oil prices.
Over the years, our team has successfully negotiated loans with lenders to support our assets, growth, costs, and consistency. It is always nice to have a banker on your side irrespective of the way the market turns!
When dealing with lenders, it is prudent to be reminded of the Biblical proverb: “The rich rule over the poor, and the borrower is slave to the lender.” I would not encourage any business person to borrow unless they have the desire, need, confidence, capacity, and honesty to fully pay back their lenders.
I would be the first to tell young couples building their lives together to pay off their home mortgages as quickly as possible, eliminate credit card debt, and live within their means. I would encourage them to listen to noted radio talk show hosts like Dave Ramsey who on a daily basis encourage all Americans to “live like no one else now so that you can live like no one else later.”
Young couples should buy a home and negotiate hard when getting their home loans early in life. They should pay their home mortgages off long before their retirement. I would advise the age of 50 years as the ceiling, so that they never “become a slave to the lender” when they retire!
We are currently in a season of low interest rates, several refinancing options, reverse mortgages, and the dreaded HELOC – Home Equity Line of Credit. Think twice and very hard before you fall into these debt traps, as countless people who have purchased expensive cars like BMW’s and/or gone on vacations, cruises, and the like using HELOC-borrowed money have ruined their lives!
In my personal and business lives, I have been approached and offered by several companies the enticement of more loans with mezzanine capital, either in terms of giving them a share of my assets, preferred stocks, or higher interest rate loans. However, I have always stayed away from such forms of funding. I built our business from the ground up as a team using the business model of consistent hard work. This has given us stability, growth, and longevity.
Lenders exist because money can control our emotions and our behavior. My advice in working with lenders is quite simple: “Work with your lender, but never be a slave to your lender!”
Find out more about me in my best -selling book “From dirt roads to black gold.” Note that 100 percent of the proceeds from the sale of this book will help people in need through my foundation, the YBC Foundation.
Stay Tuned to Tip #8: Confused? Sleep on it.
The views, thoughts and opinions expressed in this article are my own and do not represent the opinions of any entity whatsoever with which I have been , am now or will be affiliated.
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