Doing the interview at the bank, which is familiar territory to the banker but intimidating to the borrower.
Not mentioning the rate at all, but simply filling it in on the note.
"Since you need the money today, let's write it up at X%. Then we can talk later about changing it." The banker hopes you'll never bring it up again. He certainly won't.
Flat statement: "The rate for this type of loan is X%." (Never true except for small consumer loans. There is always room to negotiate.)
Postponing the rate discussion for as long as possible, hoping borrower will weaken under deadline pressure.
Ego-building. Bank president stops by during negotiations.
Talking constantly about how little the interest costs after taxes. And comparing it with finance-company rates, secondary-mortgage rates, or the cost of equity capital.
The banker looks at the company's account as a package, including loans, average balances maintained, and fees for service. Borrower options: Trade off higher average balances for a lower interest rate on borrowings, or vice versa.
The borrower is at a disadvantage because he probably get a loan only once a year or less, while the banker spends full-time at it. So prepare carefully for negotiations.
Good tactics for the borrower:
Ask interest-rate question early---in your office (home), not his. Don't volunteer suggestions.
Negotiate everything as a package---rate, repayment schedule, collateral, compensating balances. Banker's strategy will be to try to nail down everything else and then negotiate interest rate when the borrower has no more leverage and no room to maneuver.
What Banks Don't Tell You
Banks like to publish their effective annual yield, wheras money-market funds are legally permitted to advertise only the simple interest rates. The long-standing rule inadvertently conceals the fact that money-market funds do compound interest on a daily basis. If a bank and a money-market fund pay the same rate, the bank will appear to offer more by advertising the effective rate.
Some banks say they let you draw on all checks immediately, provided you put up another bank account as collateral. Catch: If a check backed by a six-month certificate bounces, the bank can break into the certificate before maturity. If this happens, you will have to pay an interest penalty
