Checklist of Issues in Negotiating a Loan

CHECKLIST OF ISSUES IN NEGOTIATING A LOAN

Many banks and lending institutions have their own form of complex loan agreements when they make loans. These is no "standard" loan agreement, and there are many issues to consider when determining whether to accept a loan and

1. What is the interest payable?
2. How is the interest rate calculated? (Calculations based on a 360 day year are more unfavorable for the borrower than those based on a 365-day year.)
3. What is the default rate of interest and is it competitive?
4. Is the interest rate coupled with all fees, competitive with other available loans?
5. Is the interest rate fixed or variable?

2, Payment Terms

1. What are the monthly or other periodic payment obligations?
2. When is the final principal payment due?
3. Is there a right to extend the due date of the loan?

3. Fees

1. Are there any loan fees, commitment fees, placement fees, points payable upfront?
2. Are there any ongoing fees or charges during the life of the loan?

4. Use of Loan Proceeds

1. Are the loan proceeds restricted for certain uses? Are the uses broad enough?

5. Representations and Warranties of the Borrower

1. Due organization of the borrower
2. Duly qualified to do business
3. Authorization to do the loan
4. Enforceability of the loan agreement
5. Accuracy of the borrower’s financial statements
6. No litigation
7. Compliance with laws
8. Payment of all taxes and filing of all tax returns
9. No adverse change in the business
10. Valid corporate existence of the borrower
11. List of subsidiaries
12. Compliance with ERISA
13. Good and marketable title assets without liens and encumbrances other than those disclosed
14. Obtaining of all required consents
15. No violation environmental problems
16. Ownership of....