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 Review Carefully  Check Note repayment terms  Check names  Check collateral  Check equity  Check use of proceeds.

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Presentation on theme: " Review Carefully  Check Note repayment terms  Check names  Check collateral  Check equity  Check use of proceeds."— Presentation transcript:


2  Review Carefully  Check Note repayment terms  Check names  Check collateral  Check equity  Check use of proceeds

3  If Authorization is incorrect, prepare change letter and send  If you have any doubt about what is in the Authorization do a change letter

4  Collect and submit timely

5  Only get one form signed  MUST HAVE AN AUDIT TRAIL  Must comply with use of proceeds in Authorization  Must match disbursements with use within 10%  Watch out for EPC/OC. No Working Capital

6  Have reviewed by experienced person  Less is more, the more exceptions the less coverage  Watch out for:  Use covenants  Existing liens  Some standard Endorsements  Oil and Gas

7  Should have with new construction  Look for encroachments  Look for access

8  Verify balance  Determine if Open End  Watch for HELOC  Future Advances

9  Check all jurisdictions  Check Bankruptcy  Check Judgments  Credit Report will have  Order right away to avoid problems POST CLOSING UCC SEARCH:  Verify Priority  Good to pre-file

10  Be certain of name  Be certain of where to file  Watch out for collateral that must be in possession of Secured Party (stocks)  Process filing takes 7-10 business days  Pre-file

11  Similar to Security Agreement  Sometimes done if business is licensed  May need to posses stock

12  Need for uncertificated stocks, investment accounts, etc.  Only way to get to the Collateral and only way to perfect security interest

13  Done with Stock Certificates  Sign in blank

14  Must match term of Loan  If you don’t care do a change letter because Authorization requires the term of the lease to be as loan as the loan  May include renewal options as long as tenant can exercise unilaterally

15  Subordinate Landlord lien to Bank lien  Must be able to cure default, so need notice of default and opportunity to cure  Must have access to collateral  Problem if you don’t get it

16  Rare, but sometimes required  Difficult to get  May not want it

17  A license is a privilege  In Pennsylvania you can take security interest but subject to Liquor Control Board  You can get interest in the ability to transfer  General Intangible under UCC-1; someone else may have a lien already  Should be mentioned in both the Security Agreement and the UCC-1  If the business closes down, you may want to remove the license

18  Good to have so that you can work with Liquor Control Board and taxing authorities, Pennsylvania Department of Revenue  Allows lender to execute transfer documents and fill out forms

19  Whole process in SOP  Be sure you have all the Franchise Documents and all signed  Franchisor should certify that these are all the documents  Careful! May render Loan ineligible!

20  Requires notice of default and opportunity to cure  Defer franchise fees is Loan is in default (hard to get)  Access to Franchisor’s books as they pertain to Borrower

21  Make sure in place  Change Endorsement  Copy of Declarations page  Mortgagee/Lender Loss Payee

22  Must have if they have employees

23  Be certain Insured is correct  Owner may be other than insured  Copy of the policy  Term long enough for loan?  Be sure in correct amount

24  Must be signed by OWNER of the policy  Must not be assigned to anyone else  Must be correct Insured  Must be correct Amount  Must be assigned as Collateral, NOT CHANGE IN BENEFICIARY

25  Check all parties  Be sure allow for Confession of Judgment whether a GP or an LP  If not all Partners must sign authority of one Partner to sign Confession of Judgment

26  Get copy of Standby Note  Compare to be sure it is correct  Be sure you have payee on Note as Standby Creditor

27  If no Note, tell them to draft one  Have Note endorsed as follows:  “This Note is subject to the terms and conditions of a Standby Creditor’s agreement between Payee and ____________ (Bank) dated the _____ day of _____________, 20__”

28  Critical  I prefer an Affidavit  One of the first things looked at  Cash is King  In kind must be supported by appraisal (I would be sure SBA agrees)  Careful about where it comes from, there are many specific rules about this

29  Purchase of more than 51% of assets  Pennsylvania Department of Revenue clearance  Escrow/Indemnification  Verify payment of seller taxes

30  Important as this is required by Authorization under collateral where security interest is listed  Should have list of all equipment  All equipment over the value of $5,000 should have a complete description with serial number

31  Good way to track use of proceeds

32  Same as a Deed for personal property

33  Must have EIN  If Borrower requires a license, need a copy (attorney, barber, restaurant with liquor license, dentist, doctor, etc.)  Pennsylvania contractors are required to have permits

34  Good to have in a business acquisition  Be sure the principal or principals of the seller are bound. No good if seller is a corporation and person that can compete is an individual. They are not bound.

35  Protects Lender and Borrower  Must match use of proceeds


37  Need if you have to complete work

38  Post closing  Very important for new construction and leasehold improvements

39  New construction only

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