ADVICE FOR PLANNING FOR A BETTER OUTCOME WITH YOUR NEXT LOAN
AS STEVIE NICKS WROTE “YOU CAN TALK TO ME”!
When you decide to sell a new product, you research its quality and desirability and assess if it will sell well. If you are a homebuilder, you research your marketplace and have detailed specifications prepared for the layout of the community and the homes. Each of you spend time and resources preparing for new projects or endeavors in your business in order to make it successful.
Having represented a wide variety of clients obtaining loans for many different purposes over many years, I have realized that it is an area in which business owners sometimes do not devote the same preparation and research that they do to their core business. Perhaps they do not feel knowledgeable enough to research this area. A business loan is one of the largest debts a business will have. Typically, they are repaid over a term of several years and up to even 20 or 30 years. The loan can have a great impact on the success of the company. In my experience, borrowers go to their lender, structure their loan and sign a term sheet or commitment letter without consulting with their attorney or accountant. Sometimes when I review a commitment letter that has already been signed—without my review or involvement—I see things that are not always positive for my client or find that the structure does not mesh with the way the company is run or is not consistent with the just completed estate plan or other facts of the business operation. Once the loan proposal has gone to loan committee and has been approved, certain terms cannot be changed without re-approval of the bank’s loan committee. Oftentimes the borrower cannot wait for re-approval and the resulting delay on closing the loan.
When clients discuss a loan with me before it is approved and signed off on, I can ensure they understand the rate provisions being offered, we can discuss who appropriate guarantors are, assets that should be carved out of the guaranty, potential costs associated with certain types of reporting requirements, and so on. When you are signing loan documents with a term of years, you do not want to have to settle for terms you do not like or for which you did not understand the impact. A little advance planning and coordination with your attorney and accountant before submitting a loan application can help you on your road to success. Next time, give me a call before you sign.
Bottom: Line: Talk to me! I am here to help. Contact me at 215.661.0400 or MOchrach@HRMML.com.
Merle R. Ochrach, Esquire
Partner, Commercial Business Practice