Loan and Credit Facility Agreements

Over the years, we’ve learned that many  clients do not understand the importance and contents of their loan and credit facility agreements.  Of course, the number one concern for clients is whether the financial terms are accurate.  What may get overlooked is what can cause exposures and costs and inabilities or delays in getting line of credit advances.  These credit facility agreements contain representations and warranties, continuing obligations (covenants) and financial ratio and calculation covenants.  Borrower (or Guarantor) non-compliance may result in suspension of future advances and/or acceleration or additional costs in remedying defaults.   It’s not just the borrower which is affected; the lender wants to avoid external auditor issues and non-conforming loans.  Good practice involves understanding and addressing finance, legal, and business issues during the commitment and document review process by both the client and counsel (in conjunction with the lender and its counsel).