Management consultant Gordon Throup considers some of the aspects to consider when arranging loans or overdraft facilities. It is important to remember that the main purpose of the negotiations is to arrange borrowings appropriate to the needs ofthe business, not to negotiate the emotive issues of percentage over base and management fees that are to be charged in respect of the agreed lending. The latter are issues on which bank managers have received detailed training and if one is not carefulthese can come to dominate discussions. Most farmers like to negotiate a reduction in the overdraft percentage over base, say a half of one per cent. The manager will then try to get some of this back by agreeing an increased arrangement fee. This arrangement fee tends to be a problem when trying to ensure there is sufficient 'headroom' in the bank borrowing facility as the fee is based on a percentage of the total borrowing in other words the more you borrow the higher the arrangement fee.
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