You’re at the closing line, escrow is about to wrap up, financing has been negotiated and approved, and then the bank sends you a stack of loan documents prepared by their attorney to review. These documents are full of provisions that limit your actions during the life of the loan, and do much more than restate the terms of the loan. There are several key points to be aware of and to focus on during your review:
- Understand all of the different events that could trigger a default.
- Calculate each fee the Lender will impose: prepayment penalty, minimum interest yield, draw fees, inspection fee, audit and exit fees.
- Confirm which guarantees and collateral is being tied to the loan.
- Identify what exactly will need to be reported to the Lender during the loan and when.
- Beware of: holdback terms, depository account requirements, post-closing documentation requirements, due on sale provisions, loan draw authorization
We caution you not to gloss over hundreds of pages of assigning rights and risks. At the same time, do not be overwhelmed or discouraged by legal jargon and terms. Reach out to your CPA and Legal Advisor who are familiar with analyzing such documents. Further, if you are in need of financing please reach out to us.