To reveal your position first or not to reveal; that is the borrower’s big question.
WSJ had an interesting article by Mike Michalowicz who argued that the shrewd negotiator offers first and reveals their bargaining position. In other words, be the first to show where you want to end up.
He contends that divergence, or the distance between the two parties, is a huge time waster. Get to the final bargaining point quickly, he says.
I’ve held to the traditional bargaining strategy where you wait for the other person to make the first proposal and bargain from there. There’s an old saying in negotiation that he who wants it more gets least.
What if your proposal is way below what the other person is willing to pay? By offering first, you give up potential reward.
In borrowing, the lender usually provides a quote and the borrower reacts. It would be silly to ask your lender for a loan application and then tell him the highest interest rate that you’ll pay. That’s just plain stupid.
The best strategy for borrowers is to get multiple loan quotes and let the market determine the right loan amount, rate and terms. You may be able to bargain further from there.
Borrowers, have you ever told a lender that you want a loan and you’ll pay a certain interest rate and no more?
- Tips on Business Loan Negotiations (thinkup.waldenu.edu)