Commercial finance transactions are often complex and highly competitive. Commercial loans offer significant benefits but there are also pitfalls if not structured properly. While you may want to figure it out on your own, working with the experienced legal team at KJK can help you avoid costly mistakes.
Our Commercial Finance & Banking Practice Group has extensive experience in providing holistic legal support for commercial loan transactions. From intense due diligence, to drafting loan documents, to handling defaults or disputes, we thoroughly understand the process and can help you confidently navigate each step.
Advising You at Every Turn:
The Role of a Commercial Loan Attorney
An attorney’s role in the commercial loans process is multifaceted, advising you at every turn on how best to proceed. Whether you are a large financial institution, specialty finance company or local lender within the state of Ohio, we protect your interests first and foremost.
Since no two commercial loans are the same, your commercial loan attorney’s role may differ at times, depending on the circumstances.
We offer the following support:
Your commercial loan attorney verifies information provided on a loan application through reliable, independent sources. A close review of financial statements listing income, profits and operating expenses takes place along with an assessment of collateral value claims.
Determining Terms of Credit
Terms of credit include interest rate, documentation and collateral requirements, and the repayment mode. These terms are unique to the transaction and vary depending on each lender and borrower. KJK attorneys have extensive banking experience and know what terms are market. We are partners in reviewing terms and can capably advise you on how to make these important business decisions.
Drafting and Finalizing Complex Loan Documentation
While each loan is unique, information typically included in a loan agreement includes definitions, conditions precedents, representations and warranties, and default events. Carefully crafting and understanding these terms is crucial to ensure loan performance and compliance; KJK attorneys advise you on all of these details. We can also advise you whether your loan requires additional documentation.
Ensuring Compliance with the Uniform Commercial Code (UCC)
The UCC is a group of business laws regulating financial transactions and contracts across most states, including Ohio. It is important to comply with the UCC to avoid future legal problems.
Advising on Loan Defaults and Disputes
Our team will advise you as to your rights and remedies in the event of loan defaults or disputes, which may include foreclosure initiation, liens or judgments.
Representation in Commercial Loan Litigation, Mediation or Arbitration
If there is an issue with your loan, you may need to go to court or attend mediation meetings. Our team can represent you throughout this process, whether in a less formal mediation or court at the county-level, or in multi-jurisdictional matters.
Don’t be caught off-guard:
Issues Surrounding Commercial Lending
The commercial lending process can involve potential issues, and KJK can help with each one.
Collateral refers to an asset that a lender will accept to secure a loan, acting as a protection measure. There may be issues surrounding that collateral, particularly if a lender must seize it after the borrower defaults. KJK will conduct thorough due diligence to determine the collateral’s actual value from the start and work to ensure the collection of that collateral if a default occurs.
Occasionally, assigned collateral loses market value over time and your commercial loan attorney can assist in asset investigations and enforcement proceedings.
With each commercial loan secured by collateral, regular, routine monitoring can help to ensure the asset continues to meet the loan’s value. As a lender, you may also need to outline how the borrower uses the asset to avoid destruction or excessive wear and tear. These are all areas where KJK can provide guidance.
Commercial loans may include various documents. However, since the terms of commercial loans differ, the documentation may vary as well.
Depending on the particular nature of the credit and financial arrangements, KJK may recommend any of the following documentation:
- Corporate Resolution
- Intercreditor Agreement
- Subordination Agreement
- Pledge Agreement
- Assignment Agreement
- Security Agreement
- Mortgage or Deed-of-Trust
- Deposit Account Control Agreement
- Error and Omission Agreement
- Disclosure and Authorization forms
Loan maintenance, or servicing, occurs throughout the lifespan of the loan. This maintenance requires various duties, depending upon the lender’s requirements. KJK works with you to determine what these requirements are and sets in place a streamlined way to monitor and work with the servicer of the loan without wasting your staff’s valuable time.
Examples of the various duties include:
- Collecting, processing and documenting monthly debt service payments
- Maintaining or monitoring real estate taxes, reserve accounts and tenant improvement escrow
- Monitoring insurance coverages in accordance with specifications put in place by the lender
- Reviewing and monitoring Uniform Commercial Code compliance
- Reviewing, approving and monitoring any leases
- Analyzing financial and operating statements
- Reviewing and processing any requests made by the borrower
- Performing site inspections annually
Depending on the type of collateral and nature of the borrower, you may need to include additional duties in your loan maintenance, such as providing financial statements and tax returns.
The lender, borrower or guarantor, or loan servicer can all request loan modifications. Many factors come into consideration and take time to analyze when considering a modification.
Some of these considerations include pre-negotiation agreements for protected discussions, additional due diligence, determination of necessary modification documentation and costs, and a requirement of enhanced collateral and reporting. Your KJK legal team reviews local Ohio laws and can advise as to how they may impact a modification.
When a borrower experiences some type of hardship, a commercial loan workout may be a beneficial solution. These workouts may include allowing commercial borrowers to make interest-only payments, temporarily deferring payments, adding delinquent payments to the end of the loan’s balance, waiving late fees and excluding other penalties that would normally apply.
The goal of a loan workout is to course correct a non-performing loan and preserve the asset. KJK attorneys are skilled in assisting both lenders and borrowers to navigate the work-out process and works to try and find workable solution for all parties.
Businesses can face challenges and become distressed. In these situations, debtor-in-possession (DIP) financing can help. For businesses filing Chapter 11 bankruptcy protection, operations will continue, and the current board and management remain in place or in possession of the business. KJK works with lenders on financing the turnaround of a protected business through DIP financing.
A specialized solution, mezzanine financing is a debt and equity hybrid model giving a lender the right to convert the commercial loan into equity in default cases. Often associated with company expansions, buyouts and acquisitions, KJK can help lead you through each step of the process.
We’re Here To Help:
Contact KJK Today about your Commercial Loans
Trust the legal team in the KJK Commercial Finance Practice to assist your needs regarding all facets of commercial loans. With 225 years of combined experience and more than 1,000 deals closed, our knowledge and understanding of the commercial loan process benefits lenders and borrowers.
We’re a full service firm:
KJK is proud to work with highly rated partners to help our clients access the capital they need to grow their businesses.
Bellwether Enterprise, a national, full-scale commercial and multifamily mortgage banking company with nearly 100 producers, provides a comprehensive network of national relationships and regional expertise. Bellwether Enterprise has a servicing portfolio of $26 billion and manages TurnCap’s loan servicing platform.
BEK’s full-service family office provides expert leadership, property management, and development teams, which have decades of real estate management, investment and finance experience, assisting TurnCap with asset management.
TurnCap’s commercial real estate financing solution provider offers bridge to permanent commercial loans. To find out more about our partners, contact our finance team and discover your commercial loan options.