Loans are an essential part of most family businesses.
Loans are way more than borrowing a set amount and repaying it with interest.
The core considerations in a loan transaction are:
- Who is the actual borrower? Is it an individual, a partnership, a company or a trust or a combination of these?
- Is the actual borrower the most appropriate taking into account any tax and risk issues?
- Is the loan amount a fixed sum or is it a line of credit?
- Are the repayments fixed or can extra/early repayments be made without penalty?
- What is the interest rate and can it change?
- What happens if the borrower doesn’t make repayments on time or cannot make repayments at all? What rights does the lender have?
- What security is the lender taking and is it adequate?
- Who are the security providers? Is anyone other than the borrower (i.e. a third party) providing security?
- If there is more than 1 lender, what is the agreement between them if they have to enforce their security (priorities)?
- Is the security already charged to another party and how to manage that situation.
- Does the lender require any guarantees?
- Are there any special (non standard) conditions that apply to the loan and if they do, what are they?
- Are the securities over assets located in different states and territories?
If you are borrowing money from a bank or other institutional lender we can assist you with:
- Reviewing the lender’s loan agreement and advising you of all the important terms including any non standard terms
- Reviewing the security documents that the lender has asked you to sign
- Negotiating the terms of any loan agreement or security documents
- Satisfying the lender’s requirements including providing certificates of legal advice and varying trust deeds to include powers that the lender requires.
- Managing any unwanted Divisions 7A issues that can arise from corporate guarantees
If you are a lender, we can assist you with:
- Preparing the loan agreement so that it includes all the necessary terms and conditions
- Preparing the security documents (for example mortgages, general security deeds over all assets or specific assets of the borrower or a third party security provider and third party and director’s guarantees)
- Investigating land and water title and personal property securities registers and advising of any already existing registered interests which would rank ahead of later interests
- Attending to stamping and registration of security documents at the relevant land titles offices or on the Personal Property Securities Register
- Advising you about Personal Property Securities Act issues that apply to the loan and security that you want to put in place
- If during the life of the loan the borrower’s circumstances change, varying the loan agreement to allow for more money to be advanced, additional or replacement security to be taken or a variation to the repayment terms
- Once the loan is repaid, preparing and registering all the necessary release documents