Economic terms are those that relate to interest rates, term to maturity, valuation, default rate provisions, and optionalities (such as profit participation either for the lender or you).
Practical terms are usually the i) conditions precedent, i.e. those that need to be satisfied before the loan is provided, ii) any repeating obligations, such as providing your accounts within certain timeframes, and iii) any financial covenants that need to be complied with that would give the lender comfort that the business is performing well enough to repay the loan.
Legal terms are mainly the Events of Default and enforcement provisions, as well as the security/guarantee provisions. Events of Default deal with the type of events that would allow either one of the parties (but usually the Lender) to claim the other party is in default of their agreement. After that the enforcement provisions would come into play and, depending on what the security package is, enforcing security over charged assets may commence even without the permission of the court.
Even though when taking out the loan the possibility of defaulting seems unimaginable, there is a chance that this might happen. In that case the security provisions are particularly important. The lender would have insisted in the most comprehensive security package but there are creative ways that you can satisfy the lender whilst avoiding significant personal exposure. If you want to read further about negotiating a loan agreement for your business click here.
We can also help with the applications for COVID financial relief such as the Coronavirus Business Interruption Loan, the Bounce Back Loan and the coronavirus Future Fund loan schemes.
If you want to discuss further with us please feel free to contact us.
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