Growing a business often means securing the right financing at the right time. From funding new opportunities to managing day-to-day expenses, financing can help your business adapt to changing needs and pursue its goals.
In this four-part series, the following topics will be addressed:
Part 1: Meeting with your Lender
Part 2: Legal Documentation and Due Diligence
Part 3: Common Types of Security
Part 4: Common Reasons for Delay and Preparing for a Smooth Closing
Part 1: Meeting with Your Lender
The first meeting with your lender can set the table for a successful corporate financing. You should expect a variety of topics to arise at the meeting, including a review of your business’ needs and financial performance, ownership structure, and the intended use of the loan.
Setting the general framework for the commercial terms of the loan should be among your goals for the meeting. In particular, the discussion should focus on establishing the parameters for each of the following areas:
- the amount of the requested loan;
- interest rates and bank fees;
- repayment terms of the loan;
- periodic financial reporting requirements;
- financial covenants;
- pre-conditions to funding; and
- the scope of the security package to secure the loan – mortgages, guarantees, general security agreements, etc.
Provided that your business and the prospective lender are a fit for the transaction, and subject to the lender’s due diligence, the lender may issue a loan agreement/commitment letter outlining the proposed financing terms and the conditions you will need to satisfy before the funds are advanced.
It is a good idea to engage your lawyer at this stage of the process to review any questions you may have about the proposed terms of the loan. For example, what is a general security agreement and what does it mean to give your lender “first priority”? What are the practical consequences of giving a personal guarantee? What should expectations be for timing and a budget for professional fees?
Educating yourself in the early stages of the process can save time, reduce surprises, and keep the transaction moving smoothly.
If you are planning your first corporate financing or preparing for a lender meeting, we are here to help. Contact us to discuss your goals, review and negotiate term sheets and commitment letters and assess security and guarantee requirements tailored to your business.
204.956.3589
204.956.3574
Stay tuned for part two “Legal Documentation and Due Diligence”.
Note: This article is of a general nature only and is not presented as a comprehensive review of the law or as being exhaustive of all possible legal rights or remedies. This article is not intended to be relied upon or taken as legal advice or opinion. Readers should consult a legal professional for specific advice applicable to their own circumstances. We do not undertake any obligation to update this article to reflect changes in law that may occur in the future.