SHARPENING YOUR NEGOTIATION SKILLS
ALASTAIR HOYNE, PRINCIPAL AT FINANZE
CHRIS WHITNEY, HEAD OF SPECIALIST LENDING AT ENNESS
From my experience, adverse credit is one of the hardest things to deal with in a negotiation. Regardless of the changes clients have made to improve their credit, if there are legacy issues, such as judgements or IVAs, lenders are generally unable to accept. I had a case recently where the client had an IVA on record, which had been fully paid off and satisfied 10 months earlier, but regardless of this, the lender needed three years post-completion before being able to refinance—thus the client ended up selling the property instead. Our approach is to call as many lenders as possible to get the best deal for the client, whether that includes the lowest blended cost of debt, maximum leverage, arrangement fees or others. Lenders want to lend and clients want to borrow, so as a broker, it’s our job to match those clients with the correct lenders and create the perfect fit, not just pick something off the shelf and hope it’s right.
‘CALL AS MANY LENDERS AS POSSIBLE’
‘IF YOU DON’T ASK, YOU DON’T GET’
You can discuss and improve deals for clients on pretty much every case other than where there is a specific product on which the detail is fixed and is simply non-negotiable. Even then, there might be areas that need to be negotiated, such as agreeing non-standard proof of income or other elements of the standard due diligence. If you don’t ask, you don’t get, so don’t be shy and give it a go! However, keep it realistic and be frank about what you want and why. Keep the discussions calm and considered; if you get excited or aggressive, you will find the shutters go up. Most importantly, be a nice person to deal with. We are all human, so are more likely to agree something if the person asking is pleasant to work with.
A key factor in any bridge will be the loan term, as this has to fit and allow enough time for a successful redemption, which is arguably the most important part of the process—I think the manner in which this is handled goes some way to separating the best lenders from the rest. There’s always going to be a conversation around broker, lender and administration fees or the valuation, and everything has to be worked out to a sensible and fair level. You have to provide substance as to why you’re trying to change the terms of the fee, etc. And there has to be an element of compromise for successful negotiations, as everyone likes to think they’ve come out positively. You should also be open and honest about your intentions, especially with what you’re trying to achieve and why it makes sense to you and the situation. If that is articulated well, then it should make any and all negotiations a lot easier.
LUKE EGAN, DIRECTOR OF BRIDGING AND DEVELOPMENT AT PINK PIG LOANS
SEAN ADAMS, PRIVATE CLIENT DIRECTOR AT ARC & CO
Rates, loan quantum and LTVs grab the headlines, but there are quite a few other factors that have an effect on the cost and overall attractiveness of any finance offering, such as personal guarantees, for which a broker can negotiate the amount or even its waiver. Similarly, some development finance lenders will request cost overrun guarantees which need to be considered carefully by any borrower. At the very least, the guarantor will want to negotiate to ensure that they are not taking on any exposure beyond construction cost overruns, but the specifics can be further bargained to negate potential impacts to the borrower. Lead-in times to a project, the mobilisation period, and how much ‘sweat equity’ is considered as a contribution can also have a big influence on interest costs and max loan sizes, so these can be negotiated in the client’s favour. Having a clear understanding of the lender’s parameters is key to knowing which terms can be improved and how to enhance them. Equally, a detailed knowledge of the borrower and their requirements will help to ensure that terms can be optimised.
‘PROVIDE SUBSTANCE AS TO WHY YOU’RE TRYING TO CHANGE THE TERMS’
‘HAVE A CLEAR UNDERSTANDING OF THE LENDER’S PARAMETERS’