Understand loan and security terms
You will read these documents once. The lender has read them a thousand times.The document pack has arrived, settlement is in a fortnight, and there are ninety pages of it. The terms you agree to this week will govern the facility for its whole life. The ones that cause trouble are almost never the interest rate. They are the covenants you have to keep, and the events that let the lender demand everything back at once. And the assets that go if you cannot pay. We read the pack, tell you what you are agreeing to in plain terms, and tell you what is worth pushing back on.
The covenants, as a list
The obligations you have to keep, written out so whoever runs your numbers can track them.
What is actually unusual
You find out which terms are ordinary for this facility and which are worth raising.
A certificate without delay
Where your lender requires independent legal advice, it is issued promptly so settlement holds.
What does understanding your loan documents involve?
A commercial facility is rarely one document. There is the loan agreement, which sets the amount, the rate, the repayment schedule and the covenants. There are the security documents: a mortgage over real property, a general security agreement over business assets, or both. And there is often a personal guarantee, which moves liability from the company to a person.
Each of those binds independently and is hard to undo once signed. The parts worth understanding before you sign are the events of default and the circumstances in which the lender can accelerate the whole debt. And exactly which assets are exposed if it does.
What matters most in a loan agreement?
The events of default, the financial covenants, and the circumstances in which the lender can change the rate or demand early repayment. Most borrowers concentrate on the rate and the term, then get caught by an operating covenant nobody was tracking.
Can I negotiate the terms?
More often than borrowers assume, though it depends on the lender. Bank standard-form documents have limited give, but covenants, default cure periods and the scope of the security are frequently movable. Private lenders are usually more flexible. We tell you which requests are realistic.
What is a general security agreement?
It gives the lender a security interest over all or substantially all of your business assets: equipment, stock, intellectual property, contracts and receivables. It is registered on the Personal Property Securities Register, and on default it lets the lender appoint a receiver over the business. Knowing its scope before you sign is the point.
Do I need independent advice for a guarantee?
Most lenders require it, and they require a certificate confirming you received it. It protects the lender by making the guarantee harder to challenge later. It also gives you the one structured opportunity to understand what you are taking on personally before you do.
The time to understand the terms is before you sign
Send us the pack and tell us your settlement date. We will tell you what you are agreeing to, and whether anything in there is worth pushing back on.
The documents look standard, and the obligations are personal
Your lender has sent a thick pack and wants it signed this week. The language is dense and the volume is intimidating. You cannot tell whether the terms are ordinary or whether something in there will cause you real trouble later. Signing without understanding is a risk. So is losing the facility by taking too long.
- We will review your loan and security documents in full.
- We will explain the events of default and the covenants in plain terms.
- We will tell you which assets are exposed and in what circumstances.
- We will advise on which terms are worth negotiating before you sign.
- We will issue an independent legal advice certificate where your lender requires one.
Settlement is close and the pack just landed
You agreed the financing weeks ago and you are keen to get on with it. Then the documents arrived. A loan agreement, a mortgage, a general security agreement, and quite possibly a personal guarantee with your name on it. The settlement date is set and the lender wants everything executed. What you actually want to know is narrower than the pack. What happens if you default, which assets are at risk, and whether anything in here is something your business will struggle to keep to.
What's included in your loan and security review service
- Review of the loan agreement, mortgage and security documents.
- Plain-language explanation of your obligations.
- A written list of the covenants you have to keep.
- Identification of unusual or onerous provisions.
- Advice on what is worth negotiating.
- Independent legal advice certificate where required.
What happens when a borrower signs without reading?
The defaults that catch borrowers are rarely missed payments. They are the financial covenant nobody tracked, or the restriction on selling an asset that turned out to matter. Or the cross-default clause that lets a problem with one facility trigger another.
Any one of those gives the lender the right to call in the whole facility at once. At that point you are not negotiating a late instalment. You are trying to refinance a debt that has just become immediately payable, while the lender holds security over your premises and possibly your home. Lenders do not usually want that outcome either, but the right to demand it is what determines how the conversation goes. That right was created the week you signed.
How we turn the pack into decisions
We read every document and tell you what each one does, in the order that matters rather than the order they arrived. The covenants you have to keep get their own list. Those are the ones that need to be handed to whoever runs your numbers.
We tell you which terms are ordinary for this kind of facility and which are not. Where something is unusual we say whether it is worth raising, and how to raise it without souring the relationship before it starts. If your lender needs an independent legal advice certificate we issue it promptly. The point of this is to let the settlement happen rather than delay it.
How the review runs
Three steps from an unread pack to a decision you can stand behind.Read the pack
We work through the loan agreement, the security documents and any guarantee, and note what each one actually commits you to.
Name the risks
We give you the covenants, the default triggers and the exposed assets as a short list rather than a summary of ninety pages.
Sign or push back
You decide with the facts in front of you, and we issue the independent legal advice certificate if your lender needs one.
The pack, in language you can act on
The pressure is real and it is not accidental. A lender who produces ninety pages on a Monday for a Friday settlement is not being difficult. But the effect is that you agree to terms you have not read, and everyone involved knows it.
We are ISO 9001 accredited, so what gets checked on a review like this is defined rather than left to how much time was available. That matters most when the whole value of the work is that somebody read the parts you did not have time to.
Our great lawyer guarantee
Six principles we hold to, whatever you bring us and however long it takes.
Take the time
We listen carefully to understand what you want to achieve, then step you through the advice and the documents.
Share our knowledge
We pass on as much as we can, so you can make your own informed decisions.
Stick to our knitting
We only do what we are good at, so you never pay for our learning.
Work as one team
Someone is always available to answer your question or point you the right way.
Fair pricing
A fixed or capped quote for advice and documents, so you do not carry the price risk.
It is your show
We are in it for a front row seat to witness your success, not for our egos.
Know what you are signing
Send us the document pack and tell us when settlement is. We will tell you what you are committing to and what is worth pushing back on. We will issue the certificate if your lender needs one.
More on this area of law
Read more about commercial borrowing, loan documents and independent legal advice.