secured lending

One of the advantages of working for a large financial institution for many years is that you are then in the unique position to understand how that, and other, businesses operate in respect of their lending procedures and what is and may not be acceptable to them.

Accordingly on large facilities (i.e. over £1m) I am quite often involved at an early stage in advising the client as to what security is required and what provisions should be put in the Facility Letter in order to protect that financial institution.

The first step of the process may very well be just a phone call to have a general chat about how the matter could and would proceed. The second stage will be to receive a copy of the Heads of Terms agreed between my client and the proposed Borrower and from that Heads of Terms producing a Loan Facility Agreement incorporating standard terms and also the Special Conditions of that particular loan.

This Facility Agreement sometimes involves fairly intense negotiation over normally a short period of time as once the Borrower and the Lender have made up their minds to lend the money the actual conveyancing aspect of the deal is normally very well advanced.

One is always mindful as well about the volatility of the financial markets in respect of the possibility that interest rates may increase making some deals less attractive and causing a Borrower to incur extra expense by having to purchase financial instruments to, for example, cap the interest rate.

Accordingly it must always be the case that speed is of the essence in dealing with such matters. With large facilities it is also my responsibility to ensure that the Conditions Precedent of the Loan Facility Agreement have been met and to advise the client of any salient features in respect of a Borrower's Solicitor's Certificate of Title in relation to the proposed security. While some security documents are standard, negotiation does take place particularly with regards to the ability of the Borrower to deal with excess rental income etc. and the power to raise funds from other Lenders and to carry on its business without its cash-flow being hampered.

Whilst obviously it is a Solicitor's job to advise the client by detailed reporting I also take the view that the client requires commercial advice as to the pros and cons of any risk scenario. One thing I have found is that clients do not appreciate being given a factual statement as to a problem with no advice as to the best solution to get round that problem.

At the end of the day the client wishes to lend the money and the Borrower wishes to borrow and it may be that the problem that arises is, for example, in reality one of valuation upon which the client should be advised and can take further expert opinion.

Once all the documentation is agreed and the loan drawn down the final piece of the jigsaw is to ensure that all registrations are completed. The client is then given a Bible of documentation so that they can refer to what was agreed if any difficulties arise in the future.

The essence of any deal is to ensure that the client has proper and valid security and that the documentation prepared reflects the agreement between the parties. The ability to respond quickly to the client's needs through experience and a library of specialist documentation ensures that in respect of any transaction the client's needs can be met.