For the same reason, lenders considered safe may still contain unexpected conditions that end up ruining borrowers who have not fulfilled their duty of care. To conclude, read the fine print! Significant negative effects: This definition is used in a number of places to define the severity of an event or circumstance, usually determining when the lender can take action against a default or ask a borrower to remedy a breach of contract. This is an important definition and is often negotiated. There are usually “standard” negotiating points raised by borrowers, for example.B. a standard definition of significant adverse changes/effects usually focuses on the impact that may have something on the debtor`s ability to fulfill its obligations under the corresponding facility agreement. The borrower may try to limit this to his own obligations (and not those of other debtors), the borrower`s payment obligations and (sometimes) his financial obligations. There are many definitions in each installation agreement, but most are either standard – and generally undisputed – or specifically for the individual transaction. They should be carefully checked and, where appropriate, well compared to the lender`s letter of offer/term-sheet. “One language and content to watch out for is the period that can result after receiving a default notification as a result of a follow-up communication,” Weitz said. “If you read this before signing and you default on your loan, you already know what to do and how fast to do it.” Some of the most important definitions contained in any agreement on institutions are: – insurance and guarantees: these should be carefully taken into account in all transactions. It should be noted, however, that the purpose of guarantees and guarantees in a contract of establishment differs from their purpose in contracts of sale.

The lender will not attempt to sue the borrower for breach of a guarantee and guarantee – rather, it will use an infringement as a mechanism to declare an event of default and/or request repayment of the loan. A disclosure letter is therefore not required with respect to insurance and guarantees in establishment agreements. The best thing small entrepreneurs can do to get a fair credit agreement is to determine where the lender`s profits come from. Any positive commitment that the lender`s facility will always prevail over the borrower`s other debts may be refused, as this is not always within the borrower`s control. A negative assurance that the borrower will not take steps to influence the ranking of the facility may be an acceptable alternative. Borrowers: It is important that the definition of “borrowers” covers all group businesses that may need access to the loan, including revolving loans (flexible credit as opposed to a fixed amount repaid in tranches) or a working capital element. These must include all target companies that are acquired with the funds made available. .