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 in negotiating the loan terms. This is a checklist of some of these issues.

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