Small Business

You are applying for a business startup loan for your new venture. A bank officer tentatively agreed to loan you the $75,000 accepting a second mortgage on your home as collateral based on your business plan. Your home was appraised three years ago for $250,000 and you owe $165,000 on the first mortgage. He is now having second thoughts based on two things.

First, he has discovered that you encountered some financial difficulties that caused you to fall behind on your debts 7 years earlier. You thought that this was not supposed to remain after 6 years. You struggled back then after losing your job but finally paid everything in full years ago. For the past 6 years, you have had an excellent payment history. You have $25,000 in savings with this bank.

Second, he is concerned that your home has actually lost value since the appraisal. However, you believe that the improvements that you have recently made to the home including a new kitchen and bathroom have actually increased the value!

Part One – What are some factors you should consider when negotiating with the banker?

Part Two – What are some factors the banker should consider when negotiating with you?