How an attorney can assist business owners in securing financing

Unlike a loan obtained to purchase a vehicle or a car, those involved in the purchase of commercial real estate can, and should be, negotiated. The timing of such negotiations are dependent upon when a borrower is able to secure financing and then submit what’s known as a commitment letter to a borrower as proof of good faith.

Brokering favorable terms for a commercial loan is crucial and can end up having a positive impact a business’ bottom line. Due to the significance of securing favorable financing terms and the fact that such matters can be complex, business owners are encouraged to seek the assistance of an attorney who handles commercial real estate matters.

In addition to the actual amount of a commercial loan, terms related to a loan that may be negotiated include duration, interest rates, amortization of payments, associated fees and any payments related to a lender’s expenses. Additionally, some borrowers may be unaware that other loan-related elements such as those related to secondary financing, insurance requirements, guarantor responsibilities, tenant estoppels and tax and insurance escrows can also often be negotiated.

In addition to helping procure more-favorable commercial loan terms, an attorney can also provide advice and guidance on how to position and structure a business to secure financing. For example, how a business is structured and registered can affect whether or not business owners are personally liable for defaults and other legal actions. Some business owners may be unaware, however, that if they agree to co-sign a business loan, personal liability protections under a LLC are voided.

To avoid potentially costly mistakes and pitfalls like this, business owners would be wise to turn to a legal professional who can assist in securing financing and throughout the loan negotiation process.

Source: American Bar Association, “Borrower’s Checklist for Negotiating the Commercial Real Estate Financing Commitment Letter,” Kathleen J. Hopkins, Feb. 2015, “Getting a Loan for a Small Business,” March 1, 2016