Negotiating with banks is one of the most delicate moments any business in financial difficulty will face. A well-prepared approach can make the difference between recovery and insolvency.
Prepare Before You Negotiate
The most common mistake is approaching the bank without adequate preparation. Before any meeting, the company should have:
- An up-to-date financial diagnosis: Balance sheet, profit and loss statement and cash-flow statements covering the last three years
- A credible recovery plan: With realistic financial projections over a three-to-five-year horizon
- A clear reading of the problems: The causes of the difficulty and the corrective measures already in place
- A concrete proposal: What the company is asking for, and what it offers in return
Negotiation Strategies
1. Complete Transparency
Banks respond worse to surprises than to bad news. Being open about the company's financial position, even when it is unfavourable, builds trust and makes the negotiation easier.
2. Present Solutions, Not Problems
The meeting with the bank should focus on the recovery plan and on demonstrating that the business is capable of overcoming the crisis with the right support.
3. Negotiate with All Creditors at Once
Where the company owes money to several institutions, the ideal approach is to engage all creditors simultaneously and put forward a single, comprehensive solution. Fragmented bilateral negotiations tend to breed mistrust.
The bank does not want to end up owning your business — it wants its money back. If you can show that recovery is more profitable than enforcement, you have a solid basis for negotiation.
What Can Be Negotiated
- Grace period: A temporary suspension of capital repayments (6-24 months)
- Term extension: A longer amortisation period to bring down the instalments
- Spread reduction: Renegotiation of the interest terms
- Debt consolidation: Combining several liabilities into a single facility
- Partial write-off: In extreme cases, negotiating haircuts on interest or principal
When to Turn to the PER or RERE
If direct negotiation fails to deliver results, there are statutory mechanisms — the PER (Portugal's court-supervised special revitalisation process) and the RERE (its out-of-court counterpart for restructuring agreements) — that provide a formal framework for debt restructuring, with legal protection for the company.
At Ravina Promissora, we support companies throughout the entire bank negotiation process, from preparing the dossier to concluding the restructuring agreement.