By: Thomas Law Group On: April 19, 2019 In: General Law Comments: 0

The vast majority of our clients use a lender in order to purchase a business, assets, or real estate. Our clients routinely sign loan documents with their lender without having an attorney review the documents or fully explain the restrictions contained in them. Borrowers often think, so long as the monthly payment on the loan is made, that they are in full compliance with their loan. Unfortunately, that is not often the case as some borrowers discover to their detriment.

In addition to the repayment terms, loan documents typically contain additional requirements or restrictions. For example, a lender will often require the borrower to provide financial information and reports either upon request or at pre-designated times. If the borrower is a legal business entity rather than an individual, there is often a restriction on any change to the business name, or to its ownership, organizational structure, or the organizational documents. Borrowers will often run afoul of these restrictions when bringing on a partner and changing the business name, reorganizing corporate documents for estate planning purposes, and/or making a change of assets outside of the ordinary course of business.

In order to ensure continued compliance, and not be in technical default of the loan, a borrower should revisit their loan documents, and consult with an attorney, before making any substantial changes to the business, ownership structure, or assets owned by the business.

If you have questions or would like to discuss your loan documents, please contact the attorneys at Thomas Law Group.