What Does a Debt Negotiator Do?

Financing negotiations refer to negotiations on how to provide import and export credits, organize international syndicated financing, and issue debt loans, stocks, and provide capital guarantees in the other country.

Financing negotiations

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Financing negotiations refer to negotiations on how to provide import and export credits, organize international syndicated financing, and issue debt loans, stocks, and provide capital guarantees in the other country.

Financing negotiations refer to how the two parties provide import and export credits, organize international syndicated financing, issue bonds, stocks in the other country, provide

Financing negotiation strategy one: prepare "negotiation language"

Background of financing communication

As a financing company, in the communication and negotiation with funders, two types of situations are often encountered: First, the corporate team does not know enough about the financing-related expertise, the funder's operating processes and financial regulations, and even major issues often occur. Misunderstandings make it difficult for the two parties to reach an agreement or even break up; second, some companies do not pay attention to the preparation of financing plans and project plans, and do not pay attention to the preparation of written documents related to financing, making it difficult for financing cooperation to have a large progress. The reasons for the differences between the general financing party and the financing party are as follows:

1. The focus of financing and financing are different. Financing parties are concerned about financing amount, financing cost, financing period and other issues. Most of them hope to integrate a large amount of funds at one time in the shortest time with the least cost (low cost), the simplest procedures, and occupy this for a long time. The funds are concerned about the feasibility of the project, the return on investment, the period of return on investment, the control of investment risk, and how to successfully exit the project. I hope the project company has a very good team. High-tech content, good marketing channels and high market share. As long as a certain amount of capital is invested, the company's project can be made the industry leader, the investment risk is small, the return is high, and it can be safely exited.

2. The language expression of the financing party is extremely limited. Due to the lack of professional knowledge, communication skills, negotiation strategies, etc., the level of expression of the project is extremely limited, and the feasibility of the project cannot be fully explained in the description of the project. "Attracted, it turned out to be a very good project but missed many financing opportunities.

3. The material preparation of the financing party is insufficient. Funders need to rely on a complete and standardized set of materials in investment decisions, and need to transfer information between different decision-making levels; while financing project information provided by funders is often scattered, unsystematic and irregular, even for enterprises The future development strategy, marketing, capital operation, cost control, etc. have not been planned in detail, resulting in the lack of sufficient written materials to understand the company's projects, and therefore the investment side cannot give up investment opportunities due to the inability to judge and make decisions.

It can be seen that there is often a "language barrier" between the financing party and the financing party. The language of communication with the funder is relatively broad, including both professional knowledge related to financing and written information that helps the funder to understand the situation of the enterprise and its financing projects, as well as information and confidence-building information and related introductions.

Negotiations require specialized language

Fund supply and demand teams are completely different "two types of people."

In practice, we find that the teams of small and medium-sized enterprises and the teams of funders (enterprises and banks, enterprises and venture capitalists, enterprises and short-term borrowers, and corporate funders) are completely different types of people. It is precisely because these people have differences in systems, backgrounds, ages, education, professions, growth experiences, ways of thinking and behaviors, etc. that often lead to various misunderstandings and discords between them in the financing process, making the financing process Progress is slow, and even the previous work is abandoned. These differences create many barriers to communication. Some business operators need to build financing teams and leverage the power of financing service agencies.

"Asymmetry of Information" Between Fund Supply and Demand

Information asymmetry is a phenomenon that affects the decision-making of both sides of information communication due to language barriers, communication methods, and communication environment, etc., resulting in information loss, information leakage and misunderstanding.

The reasons for asymmetric information are as follows:

1. The teams on both sides of the supply and demand of funds are "two types of people". They have very different ways of thinking and behavior. In the process of information communication, different languages, speed of speech, expressions, emotions, and information conveyed are different.

2. Due to the spatial distance and identity constraints of the two parties, the enterprise team and the funder have few opportunities for real face-to-face communication and low communication efficiency. It is difficult to express the concerns of both parties in a short period of time.

3. People at different levels of the project have different understandings and expressions of the project at different times, and sometimes even contradict each other. It is difficult to give a convincing, complete and scientific impression in the communication and description.

4. The "Project Feasibility Study Report" can only be used as an indispensable procedural document when the project is established, and it is difficult to satisfy the funds in terms of breadth, depth, and credibility of the considerations of risk, market, and finance.

This asymmetry of information greatly increases the cost of communication and affects the efficiency of financing.

Different concerns in terms of projects and funding

Both the supply and demand of funds have different concerns, and both sides are striving to express what they want to express. For example, if the company says there is a certain patent, the funder wants to see whether the patent certificate exists and how much the patent is worth; the company says that the market situation is good, but the funder wants to see the order or sales letter of intent and see Survey reports, data analysis and competitors. Just like two people debate, the two sides have different views, it is difficult to reach an agreement.

Because of the above reasons, a "language" or a tool is needed to resolve the differences between the supply and demand of funds and the problem of asymmetric information.

Types of "negotiation language"

The "negotiation language" is specifically divided into the following categories: First, basic knowledge: Since the two sides of the fund supply and demand are almost completely different types of people, in order to improve the efficiency of communication, companies must learn the "negotiation language" to communicate with the funder, from the knowledge level. At least you need to master the following aspects: First, professional knowledge, including finance, finance, business management, etc .;

The second is laws and regulations, which mainly include various policies and regulations related to financing; the third is work practices, which mainly include types of financing instruments, working practices and working procedures of funders and financing service agencies. Second, the data list type, many funders have their own required data lists in order to standardize the work process and improve work efficiency. All kinds of financing instruments of various banks, investment companies and other funders have their own lists. Therefore, before preparing financing materials, it is best for companies to obtain these lists of information and prepare carefully. For example: annual business license, business registration information, company charter, tax registration certificate, organization code certificate, legal representative certificate, legal representative ID card, financial statements, tax return and tax certificate, bank account Statements, related commodity transactions, labor contracts or agreements, basic settlement account opening cards, corporate qualification grade certificates (construction, provided by real estate companies), and other materials. Third, the types of applications, applications generally have a fixed format, some have a fixed form, and some only have a clear content framework.

Financing negotiation strategy 2: clear negotiation content

The important role of financing communication and negotiation

The effects of financing communication and negotiation on the financing party are mainly reflected in the following points: First, understand the basic situation, background, strength and funding direction of the financing party, in order to judge the authenticity of the financing party and the possibility of financing success. Laying the foundation for cooperation. The second is to discover the concerns of the funders and judge the possibility of successful financing. The third is to find imperfections in financing projects and information, and lay the foundation for further improvement of financing information. The fourth is to establish mutual trust with funders and lay the foundation for possible close cooperation. Fifth, establish communication channels and communication mechanisms. Sixth, accumulate experiences and lessons from presentations and communication to lay the foundation for the next cooperation.

The role of communication and negotiation on funders is mainly reflected in the following points: First, understand the basic situation, background and strength of the financing party and financing projects, and lay the foundation for further cooperation. The second is to find imperfections in the information provided by the enterprise, and require the enterprise to further improve the information. The third is to find the key points and problems in the financing process of enterprises, and to inquire about the enterprises. The fourth is to establish communication channels and communication mechanisms. The fifth is to establish a project database to accumulate experience for other project negotiations.

Content of financing communication

Take the introduction of venture capital as an example.

For financing companies, the content of presentation and communication includes: one is the historical evolution of the company, its advantages and background; the other is the cause of the financing project and the development and change process; the third is the project-related policies and industry conditions; the fourth is the project Technology and market conditions; the fifth is the advantages and problems of the project; the sixth is the development plan of the enterprise; the seventh is the amount of funds required and the cooperation mode.

The above content framework and content are basically the same as the content of the business plan, but because it is dictated, depending on the occasion of communication, and the identities of the financing parties involved in the communication are different, they can be flexible in the communication order and details.

For funders, the content of communication includes: first, shareholder background and strength; second, achievements and financing cases; third, funding direction and cooperation methods; fourth, the position and profit model of the proposed investment project in the industrial chain; Six is the technological advancement and sustainable development ability of the enterprise; Seven is the situation of the company's competitors; Eight is the situation of the company's market order; Nine is the amount and cooperation method that the enterprise hopes to raise; Ten is the security guarantee that the financing party can provide.

For the above issues, different funds have different priorities. If the corporate statement is clear, the funder will generally ask questions about the above issues in depth. Regardless of whether it is a funder or a financing company, the above content is generally stated and inquired around the content of the business plan, which is one of the reasons why we repeatedly emphasize the need to write a good business plan.

Contents of financing negotiations

If it enters the substantive negotiation stage, it is often not far from the success of financing. This section still uses more complex venture capital as an example.

At this stage, the contents of the two parties usually include: one is the amount of financing; the other is the composition of shareholders and the setting up of the equity structure. Can the funder control the shares? Disposal of debts and contingent debts; 6 is the corporate governance structure of the new company; 7 is the placement and remuneration of personnel; 8 is the formation and incentives of the management team; 9 is the policy of the relevant government departments; 10 is the audit, evaluation, Employment of intermediary agencies such as legal and financial consultants; eleventh is the division of labor and schedule of the work of both parties.

Most of the above contents belong to the framework of the cooperation agreement between the two parties, and also include some considerations for the company's future operations.

Financing negotiation strategy three: determine the negotiation steps

Steps in financing negotiations

In view of the importance and long duration of financing communication and negotiation, in order to facilitate the mastery of the application, we can analyze the working process of this process as follows: first, preparation for financing communication and negotiation; second, on-site presentation and communication; third, Supplement and improve information and policy consultation; fourth, further communicate and determine the intention of financing cooperation; fifth, substantive negotiations; and sixth, signing of financing agreements.

Communication preparation stage

1. Document preparation

Enterprises need to prepare the materials and business plans listed in the financing information list, and print and bind the appropriate number of relevant documents for use. Qualified enterprises can make ppt files and prepare to demonstrate.

Team preparation

It is mainly to determine the team members who participate in the presentation and communication, and to do a good job of the specific division of labor. In general, in addition to the participation of the financing director, the person responsible for finance (sometimes the same person as the financing director), technology and marketing also participates for inquiries.

Most small and medium-sized enterprises lack teams and are not good at communication. In this case, people who are familiar with the situation in various aspects and are more familiar with the financing plan can be selected as the main presentation and communication personnel.

3. Use of external resources

In order to improve the efficiency and effectiveness of communication, qualified enterprises can take advantage of external forces to participate in presentations and negotiations, as financial consultants for corporate financing, and can invite government officials in charge of relevant departments of SMEs to participate.

4. Preparation for enterprise site management

The place where the general funder communicates with the enterprise will be selected at the site of the company's production and operation in order to visit the site. Therefore, it is best for the enterprise to prepare for the production site and management site of the enterprise, and arrange personnel who are familiar with the situation to give on-site briefings.

5.Simulation exercises

If the corporate team lacks experience in financing negotiations or is unfamiliar with the contents of the financing plan, we recommend that companies conduct simulated exercises in financing negotiations. The purpose of the exercise is not to defraud the funder, but to be able to correctly convey the relevant information of the enterprise and the project, and make statements in accordance with the content of the financing plan, so as to avoid conflicts with the content of the plan and cause misunderstanding and distrust to the funder.

Supplement and improve information and policy consultation stage

If the funder is more interested in the enterprise and the project, the enterprise can prepare to supplement the information or conduct legal and policy consultations on the issues raised by the funder that cannot be resolved on site and those not covered by the business plan.

Things to note at this stage include:

1. If, after judgment, the funder has no intention to cooperate, it may not provide information;

2. If it involves the business secrets of the enterprise, you can provide simple information or explain to the funder, and then provide it when entering the substantive cooperation stage.

3. Don't be perfunctory, deal with errands, take it seriously, and don't provide false information, "it's true when it's fake";

4. If the information provided requires a large investment from the enterprise, it should be carefully considered, and the purpose and authenticity of the funder should be comprehensively judged to determine whether to provide or invest. If necessary, the enterprise can ask the financing service agency or relevant experts to assist in decision-making.

Substantive negotiation stage

The issues that should be paid attention to when negotiating with creditors: First, prepare detailed information; second, pay attention to the concerns of the financial parties; third, carefully answer the questions raised by each financial party; fourth, do not rush to achieve success; five It is to consider the problem from the perspective of the capital side, and think in other places.

Issues that should be paid attention to when negotiating with equity funds: first, invite experienced personnel to participate in the negotiation; second, prepare various cooperation models in advance, do not stick to a cooperation model; third, it is best to design the relevant cooperation framework in advance, So as not to be caught off guard; Fourth, don't easily express your refusal or consent to issues that involve the company's major and long-term interests, so as to avoid being passive; Fifth, in the early stages of negotiations, business operators should not easily come forward or express their views; do not easily give up their controlling rights; Sixth, pay attention Understand and ask the funder's ideas and opinions; Seventh, pay attention to showing the team's image during the cooperation process. Each negotiation is a display of the corporate image, so it must be taken seriously, and if necessary, a financing consultant can be asked to provide technical support.

Sign financing agreement

The financing agreement is an important legal document for both parties to the funding needs to clarify the power and obligations of the parties to the funding needs and to coordinate the relationship between the two parties (and possibly multiple parties). The classification of financing agreements is as follows: First, they are classified according to the nature of financing, which can be divided into: debt financing agreements and equity financing agreements. The second is based on the classification of different financing instruments, which can be divided into: bill financing agreements, entrusted loan agreements, trust loan agreements, loan agreements, financing lease agreements, and project financing agreements. This classification method is convenient for enterprises to sign different agreements according to different financing instruments. The third is classified according to different financing channels, which can be divided into: bank financing agreements, pawn financing agreements, trust financing agreements, and financing lease agreements. Fourth, it is classified according to different investment and cooperation methods, which can be divided into: Sino-foreign joint venture agreement, Sino-foreign cooperative operation agreement, joint venture agreement and investment cooperation agreement.

This stage is the reflection and consolidation of the negotiation results, and also the premise of funding arrangements and substantial cooperation between the two parties. Generally, funders have agreements in a fixed format, and companies can revise on this basis to better reflect the results of the negotiations between the two parties. Protect the interests of the business.

Financing negotiation strategy four: master negotiation skills

Although financing negotiations are different from diplomatic negotiations, they also require participants to have high political and professional qualities. The first is to be familiar with policies and regulations; the second is to understand the investment environment; the third is to know the status of the project; the fourth is to have the strategies and art required for negotiation. Therefore, regardless of the size and level of the negotiations, participants must take it seriously and must not engage in hastily. Because the agreement contract is the life and death of the project (enterprise), once the mistake is made, it will bring irreparable economic losses and adverse political effects.

Determine negotiation principles

All financing activities are project-based and guided by negotiation and contract signing. The level of negotiation and signing is related to economic interests and political influence. Therefore, some basic principles must be adhered to:

1. Be prepared to talk. Forewarned is forearmed, without prejudging the waste. The same is true for investment negotiations, so be prepared in advance. The first is the composition of the negotiators, who talks, who cooperates, who translates, who works as a consultant, and various people, etc. must be complete and have a clear division of labor and responsibilities in advance; the second is the preparation of plans, including policies and regulations, and an investment environment overview The specific conditions of the project and the conditions for cooperation; the third is the preparation of the contract, the agreement text and related information documents; the fourth is the commitment and guarantee measures. Only when you are prepared can you win the initiative to negotiate and achieve the desired results.

2. Principle of interest. The purpose of financing cooperation is to promote the development of enterprises. Therefore, reasonable interest standards must be verified based on actual calculations. Mutual benefit can be said to be the theme song of financing.

3. The principle of equal reciprocity. Investors can be people from different countries, regions, different systems, and backgrounds. They have different ideologies, rich and poor, but as partners, both parties have equal legal status. It is favorable and modest to be indifferent to negotiations and move forward and backward freely.

4. Reasons for policies and strategies. Financing is not begging or asking for help. Dealing with funders is not just a question of funding technology. Therefore, it is not only about policies but also about strategies. In the negotiation, the negotiation strategy is a unified performance of principle and flexibility. It is necessary to plan in advance, and to adapt to the situation in a timely manner, pay attention to the methods and methods, and be beneficial and rational. This is the highest level of negotiation.

Choose timing

Many companies are eager to find strategic investors and eager to sell their projects and business plans to funders, but there is a timing issue in attracting funds. How to choose the timing is explained as follows:

The first is the emergence of policy benefits, that is, the newly introduced policies bring major business opportunities to enterprises, such as: 1. the introduction of a unified replacement policy for identity cards; 2. the centralized treatment policy for medical waste; 3. the state encourages energy-efficient small-displacement vehicles; 2. The state encourages the development of leading enterprises in agricultural industrialization; 5. The state encourages the improvement of enterprises' informationization level. Companies related to these policies are more favorable in the financing process.

The second is that companies obtain major orders. In the capital market, listed companies often release news of obtaining government procurement or winning bids, which will have a certain stimulating effect on stock prices. Also for non-listed companies, getting orders is very convincing to future cash flow, and attracting capital at this time is more beneficial to the company.

The third is that the enterprise obtains a patent certificate or an important property right certificate.

Fourth, the financing information is ready. After the financing information, mainly the financing plan, has been accumulated and perfected, it is a good opportunity to contact the funder.

Protect the interests of the business

The first is the protection of trade secrets. In the process of providing business plan and communication, the business plan, market, technology and strategy of the company will definitely be involved. This mainly depends on the company's grasp of the plan's information and judgment of the investor's identity. It can also be restricted by means of confidentiality agreements.

The second is to determine the financing method and strategy in advance, and if there is preparation, it is not necessary to avoid it. This can avoid unpreparedness and hasty decision in the negotiation process.

The third is the reasonable determination of the value of intangible assets. Many small and medium-sized enterprises, especially technology-intensive enterprises, will face this problem in the process of attracting capital, which mainly depends on the negotiation and pricing capabilities of the enterprise and the funder.

The fourth is to ask external experts to provide support. For many companies, the importance of this issue has not yet been recognized.

Enterprises generally value the value of physical investment, and do not pay much attention to the value of intelligence and external brain. This is where many SMEs should improve. Of course, the use of external experts also needs to have some discrimination.