Commercial Loans Buying Guide
Things to watch out for
Aside from the disadvantages already mentioned, there are
a number of things you should be aware of as regards commercial
loans:
- Loan fees. The lender may charge up-front loan
or processing fees. Check these fees carefully, and try
to get an estimate as soon as possible to help you evaluate
the loan package.
- Prepayment. Ideally, you want to be free to pay
off the loan (all or in part) at any time before its due
date. Unfortunately the majority of lenders are likely to
charge a redemption penalty in the first 3 to 5 years of
the loan. But after that initial period, you should make
sure that your loan agreement gives you this flexibility
and try to avoid a prepayment penalty for paying off the
loan or part of the loan early.
- Grace period. Try to get a grace period for any
payments. For example, the monthly payments may come due
on the first day of each month, but they won't be deemed
late until the fifth day of the month. · Late charge. If
the loan includes a fee for late payment, try to make sure
that it is a reasonable charge.
- Legal Fees. If the lender requires some form of
security, you may incur legal fees arranging for the appropriate
documentation.
- Solicitors' fees. The lender will likely insist
on a clause that says in the event of any failure to pay
on the loan, the borrower will reimburse the lender's fees
and costs in enforcing or collecting on the loan. Try to
insert a qualifier that the reimbursement will cover only
"reasonable" solicitors' fees.
|
