HomeFWJ TakeawaySecured lending legal – what every banker should know

Our experienced banking and finance lawyers at Francis Wilks & Jones advise on all different types of terms which lenders and financiers include in their business loan agreements including:

  • margin protection – these help protect lenders and pass on the cost of borrowing to the borrower if it rises
  • fees – a financier will need to ensure that the business loan agreement is carefully drafted to ensure that any fees it will be charging are clearly set out and legally enforceable of claimed. These could include (but are not limited to) any of the following: arrangement fees, commitment fees, agency fees, cancellation fees, utilisation fee and underwriting fees.
  • costs and expenses – the lender will generally ask a borrower to pay for incidental costs to arrange and run the loan, such as the preparation and execution of documents and the registration of charges. The borrower will usually agree to indemnify the lender for these costs. Again, these need to be carefully drafted and set out to ensure that they are properly enforceable. Legal advice is highly recommended.
  • remedies and waivers – the business loan agreement should contain the clauses which provide remedies, but these should not restrict the lender’s rights, e.g. the lender should not be limited to using one remedy when it has more than one remedy available to it and the lender’s rights under the agreement should not take the place of any rights available to it under general law.
  • repayment – it is important for the repayment schedule to be clearly listed out in the business loan agreement in order that the lender knows when it is due to receive its payments. This clause, however, will not be necessary if the business loan is on-demand which means the lender can request repayment whenever it chooses.
  • prepayment – this is the right for the borrower to repay the loan early. The lender / bank will only want to allow this if certain conditions are satisfied. The lender may draft in a provision for a prepayment fee which it will be entitled to charge to the borrower.
  • cancellation – for revolving facilities which have a commitment fee charged, the borrower may not need to draw upon the full amount of the facility. The loan agreements may allow the borrower to cancel the commitment fee in this circumstance. The bank / financier, however, will want to ensure that it can charge a cancellation fee to the borrower to make up for the loss of the commitment fee.

Our expert team of secured lending solicitors at Francis Wilks & Jones are here to help you with any issues you might be facing. Our knowledge of secured lending is very detailed and we are experts in both the legal aspects of secured lending and the more “commercial” aspects of getting the business loan in place and agreed. Our practical daily experience and legal expertise means that we can assist whatever the nature of your lending enquiry.

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