Credit Negotiating, 2014 CreditScape, Western Region Credit Conference Seminar Slide Deck, sponsored by Credit Management Association.

1
CMKF
Creim Macias Koenig & Frey LLP
CCrreeddiitt NNeeggoottiiaattiinngg
**********************************************************************
SEVEN TIPS I HAVE LEARNED FROM MY WORK
WITH CREDIT MANAGERS
**********************************************************************

2
CMKF
 Richard Macias is a partner with the law firm of
Creim Macias Koenig & Frey LLP. The firm
specializes in creditors’ rights.
 Mr. Macias represents trade suppliers,
manufacturers and financial institutions in
litigation involving contract enforcement actions,
bankruptcy, business transactions, bad faith
claims, collections, antitrust and dealer
terminations.
 Mr. Macias received his law degree from Harvard
Law School in 1975.
 Prior to entering private practice, he served for
three years as a criminal prosecutor in the office
of the Los Angeles City Attorney and later was
appointed to be Special Counsel to the City
Attorney. He also was an Associate Professor of
Law at Loyola Law School in Los Angeles, where he
taught courses in litigation procedure, trial
practice and negotiation skills.
 He has written numerous articles on topics of
interest to secured and unsecured creditors.

3
CMKF
The Economic
Environment of
Credit
Negotiation in
2014

4
CMKF
Banks slashed small business lending by $43 billion
http://money.cnn.com/2011/02/11/smallbusiness/small_business_lending_drop/index.htm

5
CMKF
Small Business Lending Trends

6
CMKF
http://online.wsj.com/article/SB10001424127887324010704578418361635041842.html

7
CMKF
1. The “Four “C’s” Of Credit Negotiating
Just as there are the C’s of credit risk management, those attributes that
help determine how risk can be evaluated (character, capacity, capital,
conditions and collateral), there are the “Four C’s” of credit negotiating:
 Careful: Really listen to the other party for hints about problems. Be
interested in their issues.
 Calm: This is a tactic that will encourage the other side to state their
position and objections. You can turn this off when it is to your tactical
advantage.
 Clear: Confirm the other party heard you and clearly understands your
position.
 Comprehensive: Prepare yourself as best you can under the
circumstances, time constraints and information available. Do your
homework. Think about: Possible “What Ifs,” and “ What Not's,”

8
CMKF
2. Leverage in Credit Negotiation
Both sides must want something or else there is no point to be
negotiated. Usually one side needs the bargain more than the other
does. The difference in this wants/needs equation is leverage.
a. Credit negotiation inevitably is positional.
 They have and you want.
 Not very often you have a win/win scenario.
b. Where is the business relationship?
 Are you still interested in doing business?
 Do they still want to buy?
c. The ultimate objectives of credit negotiations
 Immediate Dollars, or
 A solid commitment for payment, or
 Information about financial issue that impact your future
credit decisions.

9
CMKF
3. The Importance of Personality in Credit
Negotiation
You must anticipate how the other
side will bargain. Is this someone
who is combative or a compromiser,
a poker player or a chess player?
You can't change them but you need
to have a good sense of the other
side.
a. Like types work together best.
b. Blunting intimidation with
firmness and calm.

10
CMKF
Example: The debtor tries to bully you in to an early concession.
 Bullying has different forms. The debtor may be of strategic
importance or the individual you are negotiating with has an
assertive style, using fear and threats to gain concessions.
 “I’ll take my business elsewhere if you force this issue.”
 “If you push me too hard we will file for bankruptcy protection.”
 “If you push me on this my manager is very friendly with your
CEO. He will complain that you are being unreasonable.”

11
CMKF
Example: Intimidating personality.
 Individuals who exert power to intimidate the other side do it
because it works. Sometimes the individual uses a senior title to
intimidate. In reality they may only be influential in their own
environment. They may not be used someone pushing back.
 A good negotiator will diffuse this tactic immediately: “Our
Company does not do things the way you are suggesting and I
won’t agree to it.” (i.e.: This draws the line in the sand and
makes it clear you will not be intimidated) Then begin to build
your case around logic and if appropriate with insight into the
other side’s needs.
 Emphasize that you are trying to find a BUSINESS solution that
works for both of parties. “If we can’t work together to come up
with a solution we both lose. We do have a contract that defines
how we agreed to work together. “

12
CMKF
4. Establishing Your Credit Management Goals
Effective negotiators start with a
reasonable range of expectations but begin
by bargaining for a result at the higher end
of the range.
a. Are there “no cost” options?
b. Setting a justifiable goal instead
of merely a "bottom line."
c. Do you know what you (and
your boss) want?

13
CMKF
5. Essential Strategies For Credit
Negotiation
• Be Prepared (DON’T GO IN COLD)
• Negotiate With the Decision Maker
• Keep Your Powder Dry: Control When and How
You React
• Try To Get A Feel For What They Want Before They
Know What You Want
• Match Your Personal Style to the Other Side’s
• Know When You Will Walk Away, and How.

14
CMKF
Example: The debtor is a slow payer. When confronted the
reaction is: “For cash management reasons, we pay everyone
slow to their terms. So if you want to do business with us that is
how you will be paid.
 The debtor’s using a blended approach: both logic, “That is
the way we do it”, and power/intimidation," Take it or leave it.”
 Your reaction can use the same logic and power as the debtor.
Response: “We are a business too. We have to maintain
adequate cash flow to stay in business. (Logic) Or, we are
required by law to extend all customers in the same class of trade
the same terms. We can not have a payment policy for your
company that is different from your competitors.” (Fear/Power)
 Ask the open ended question but tie it to your objective in the
negotiation. “Considering our terms are N30, what can you
suggest that will help both of us?

15
CMKF
Example: The debtor reacts with a response that asks
you to be sensitive to their needs.
Listen carefully. Respond with the needed sensitivity
but tie your response back to your original position.
Never lose sight of your objective in the negotiation.
Have pre-planned the options you are willing to
discuss.
 Ask “What do you need?” “I will see what I can do.”
“Let’s explore the options.” Try to avoid a heavy
handed response that will change the tone and may
lead to confrontation.

16
CMKF
6. The “Art” Of Credit Negotiating Is In
Being Able To Adapt, Improvise And
Overcome
Example: The debtor offers a position that is not clear and
must be better understood and can be challenged: “I’d like
to pay you but our system and approval process slows our
payments.”
 Ask open ended questions that will reveal the real problem:
 “How long is your average receipt of invoice to payment
cycle? What specific parts of the process cause the
delays you are referring to? What can we do to speed
things up? Can we work together to streamline the
current process?”
 "Cool" vs. "Hot" negotiating environments

17
CMKF
7. Effective Concessions: When to “TRADE OFF”?
 IF YOU GIVE SOMETHING UP, GET SOMETHING BACK IN RETURN.
 Know what you want to have vs. you must have as the outcome of the
negotiation.
 Anticipate what you can give up in a negotiation. Be prepared to do so if
absolutely necessary.
 Avoid deadlocks: Ask the other side. “I hear what you are asking but how do
we make that work for both of us?”
 Example: “OK I understand you have to delay payment. I can accept it before
my month end as you proposed. However, to agree to this you will have to
bring the entire account current for shipments to be reinstated.”

Credit Negotiating, 2014 CreditScape, Western Region Credit Conference Seminar Slide Deck, sponsored by Credit Management Association.

More Related Content

What's hot (20)

Viewers also liked (20)

Similar to Credit Negotiating, 2014 CreditScape, Western Region Credit Conference Seminar Slide Deck, sponsored by Credit Management Association. (20)

More from Credit Management Association (20)

Recently uploaded (20)

Credit Negotiating, 2014 CreditScape, Western Region Credit Conference Seminar Slide Deck, sponsored by Credit Management Association.