Understand loan and security terms
We will help you understand what your lender is asking you to agree to before you sign.
Signing loan and security documents without understanding what you are agreeing to is one of the most common financial mistakes people make. Lenders produce thick document packs on a tight timeline, and the pressure to sign quickly is real. But the terms you agree to at signing will govern your relationship with the lender for the life of the facility. We advise borrowers before they sign, in plain language, so they understand exactly what they are committing to and whether there is anything worth pushing back on.
What does understanding your loan and security terms involve?
A commercial loan facility typically involves multiple documents: a loan agreement (setting out the amount, interest rate, repayment schedule, and covenants), security documents (mortgages over real property, general security agreements over business assets, or both), and in many cases personal guarantee documents requiring key individuals to become personally liable for the corporate debt. Each of these documents creates binding legal obligations that are difficult to undo once signed. Understanding the terms before signing, including the events of default, the circumstances in which the lender can accelerate repayment, and the assets at risk, is fundamental to making an informed commercial decision.
What are the most important things to look for in a loan agreement?
The most critical provisions in a commercial loan agreement are the events of default (what triggers the lender’s right to demand immediate repayment), the financial covenants (ongoing obligations to maintain certain financial ratios or metrics), the circumstances under which the interest rate can change, and the lender’s rights to enforce security. Many borrowers focus on the interest rate and repayment schedule and miss the operational covenants that can cause problems during the life of the facility.
Can I negotiate the terms of a loan agreement?
Whether a loan agreement is negotiable depends on the lender and the nature of the facility. Bank standard-form documentation has limited negotiability, but there is often more room to negotiate than borrowers assume, particularly on financial covenants, default cure periods, and the scope of security. Private lenders are generally more flexible. We advise on which terms are worth pushing back on, what is typically negotiable, and how to frame those requests in a way that does not derail the lending relationship before it starts.
What is a general security agreement and what does it mean for my business?
A general security agreement (GSA) is a document under which you grant the lender a security interest over all (or substantially all) of your business assets, including equipment, inventory, intellectual property, contracts, and receivables. It is commonly used by banks and commercial lenders alongside a mortgage over real property. A GSA is registered on the Personal Property Securities Register and, in the event of default, gives the lender the right to appoint a receiver or administrator over your business. Understanding the scope of assets you are securing and what happens if you default is essential before you sign.
Do I need independent legal advice before signing a loan with a personal guarantee?
Know exactly what you are agreeing to.
Identify the terms worth negotiating.
Independent legal advice certificate provided.
The time to understand your loan terms is before you sign.
The documents look standard, but the obligations are personal and binding.
Your lender has sent through a thick document pack and wants everything signed within the week. The language is dense, the volume is intimidating, and you are not certain whether the terms you are about to agree to are standard or whether there is something in there that could cause you serious problems down the track. Signing without understanding is a risk, but so is losing the facility by delaying too long.
- We will review your loan and security documentation in full.
- We will explain every key term in plain language, including events of default and covenant obligations.
- We will advise on whether any terms are worth negotiating before you sign.
- We will issue an independent legal advice certificate if required by your lender.
Financing is ready, but the paperwork is more complex than you expected.
You have agreed financing terms with your lender and you are keen to proceed. But the document pack has just arrived and you have an overwhelming amount of paperwork to understand, this may include a loan agreement, mortgage, general security agreement, and possibly a personal guarantee.
Your settlement date is approaching and the lender wants everything signed. You want to understand what you are agreeing to before you commit, especially around what happens if you default, what assets are at risk, and whether there are any obligations in the documents that your business may struggle to maintain.
What's included in your loan and security terms review service
- Review of loan agreement, mortgage, and security documentation.
- Plain-language explanation of key terms and obligations.
- Identification of unusual or onerous provisions.
- Advice on negotiation opportunities.
- Independent legal advice certificate (where required).
What happens when borrowers sign without understanding what they agreed to?
Borrowers who sign loan documents without proper advice regularly find themselves in breach of obligations they did not know they had taken on. A financial covenant they missed, an asset disposal restriction they did not read carefully, or a cross-default provision they did not anticipate. Each of these can trigger a default event that gives the lender the right to demand immediate repayment of the full facility.
At that point, the borrower is not dealing with a missed payment or a short-term cash flow problem; they are facing the potential loss of the secured assets, including their business premises or home. The emotional and financial cost of that position is something we see regularly in our practice.
Here is how we make sure you go into your loan with full understanding.
We review every document in your loan pack and explain what each clause means for you and your business. We highlight the provisions that carry the most risk: the events of default, the covenants you must maintain, and the obligations that will govern your relationship with the lender for the full term of the facility.
Where there are terms worth negotiating, we tell you which ones and help you frame the request in a way that is likely to be accepted. And if your lender requires an independent legal advice certificate, we provide that efficiently so the transaction can proceed without delay.
We turn a complex document pack into a clear set of decisions.
Review the documents.
We work through your loan agreement, security documents, and any guarantee, explaining what each provision means and identifying any terms that are unusual or potentially onerous.
Understand your obligations.
We give you a clear picture of your obligations for the life of the facility, including the financial covenants, default triggers, and circumstances in which the lender can enforce.
Sign with confidence.
With a full understanding of what you are agreeing to, you sign knowing exactly what your obligations are and what protects you if things change.
Finance lawyers who have helped borrowers understand their loan documents across a wide range of transaction types.
We understand the pressure that comes with a ticking settlement clock, but the obligations you are about to take on are real, personal, and long-lasting. A few hours spent understanding them properly is worth considerably more than years of uncertainty about what you agreed to.
Our lawyers review loan documentation quickly and thoroughly, explain what matters in plain terms, and give you an honest assessment of whether there is anything worth pushing back on. We will not create delay where none is warranted, but we will make sure you have the information you need to make an informed decision.
We understand you want to know the cost, before we get started.
We will map out our process, from beginning to end, so you know what the journey will look like before you get started.
We will provide you with a clear and detailed Work Proposal covering each step along the way.
Our fair fees are all-inclusive. No hidden costs for telephone calls, emails, photocopying, couriers, or coffee.
Our great lawyer guarantee
We want to be part of your team over the long term. We achieve this by adhering to these core principles:
Take the time
We listen carefully to understand what you want to achieve. Then we thoroughly explain our advice and step you through the documents. You can be sure you know the full consequences.
Share our knowledge
We will pass on as much knowledge as we can, so you can make your own informed decisions. We want to make you truly independent.
Stick to our knitting
We only do what we're good at. You can be confident that we know what we're doing and don't pass on the cost of our learning.
Work as one team
Someone will always be available to answer your questions, or point you in the right direction. You will also benefit from a range of perspectives and experience.
Fair pricing
For advice and documents, we provide a fixed or capped quote so you don't take price risk. If you're in a dispute, we map out the process and costs so you know what to expect.
It's your show
We're not in this for our egos. We're in it for a front row seat to witness your success.
