Los Angeles Daily Journal, June 26, 2013
“Do not be misled. Even in a ‘borrower’s market,’ a borrower is at a significant disadvantage vis-a-vis its secured lender. From the commencement of the relationship, a secured lender typically possesses the ‘power of the pen’ in its dealings with its borrowers. The primary focus is naturally on the ‘economic terms’ of the deal - the term of the loan, payment terms and the interest rate, costs, fees, and charges that the secured lender is charging for its loan. Typically, the secured lender will provide its borrower with a term sheet that contains the economic terms of the loan, as well as language that suggests that the definitive loan documents will include ‘standard’ provisions consistent with a transaction of this nature. In some instances, the secured lender will actually provide a draft loan agreement with these standard terms. Although a borrower will most likely attempt to negotiate the economic terms of the loan, in too many instances the borrower will fail to address the noneconomic terms, and certainly not the ‘standard terms’ to be included in the definitive loan documents. Failure to address the standard provisions, in particular, can lead to major problems for borrowers down the road.”
This White Paper will “open a borrower’s eyes” to give real consideration to what lurks behind those “standard terms,” and discuss the typical pitfalls resulting from failure to address certain standard terms.