Business finance is essentially where the loan is wholly or predominantly for the purpose of business. If the financier or lender is an institution it is likely that the institution will be regulated.
For the security of a secured loan to be effective, whether it is a fixed and floating charge or a secured loan against property, registration processes must be followed.
- timing can also be an issue when considering secured lending, as the processes can take longer than expected, especially with a secured loan against property. In situations involving property charges, a valuation and certificate of title should usually be obtained and sometimes a survey. These can take time to obtain.
- when taking a business loan, it is important that you do seek independent legal advice before signing any loan agreement or security documentation. Because commercial finance is unregulated, the provider is not obliged to ensure that a business takes the necessary advice. This can be a short-term convenience but create long-term issues when the operation of the finance isn’t as expected.
If you are providing secured lending, and a third party is providing security, for example a personal guarantee, you should ensure that the guarantor takes independent legal advice to mitigate risk of the guarantee being challenged in the future.