Loan Agreement in Montana: Is the Loan Agreement Negotiable?
Even though bankers and lenders will come up with a number of restrictive measures put in place to ensure that they have the upper hand and always get their money when a borrower defaults, the truth is that every borrower is at liberty to negotiate for better loan agreement terms. From the lender’s perspective, there are restrictions that they keep in mind before they approve and sign a loan agreement, for example, your cash flow and whether it will be sufficient to service the loan, the strategy control which is used when the lender believes that that the resources of the company or your personal assets would create a non-feasible degree of illiquidity; balance sheet’s maintenance, as well as their right to call the loan/ make the infamous trigger. The lender would also want to know about the borrower’s asset preservation strategy because they would be at a loss if the asset regarded as collateral is sold or even pledged to another creditor.
In the same way, you need to reassess the terms of the agreement to ensure that you will be able to make flexible loan repayments and limit the possibilities of default by reassessing the terms offered and negotiating for more favorable terms. At the same time, you should never assume that the terms presented to you by the lender after your first meeting are set in stone. Now to ensure that you negotiate for good terms, you need to research first, but you also need to make sure that you know what to expect from the agreement. If you are about to sign a loan agreement in Montana, we’d recommend getting acquainted with loan agreement documents used in the state by downloading the free Montana loan agreement form. While you figure out things like your credit history, credit score, and workout your current income and expenses, a sample loan agreement form ensures that you get started with the negotiations on the right foot.
Some of the provisions that you can negotiate in the agreement include:
Interest RateEven if you are a high-risk borrower because you don’t have the best credit score, you can always negotiate the rate of interest charged. And the good news is that you might enjoy even more favorable interest rates if you are aware of the maximum rate of interest acceptable in the state. In Montana, the legal maximum rate of interest that lenders are allowed to charge is 15% in the presence of a written agreement or a rate of 6% above the prime rate put by the Federal Reserve in the absence of a written agreement. An interest rate of 10% is charged on court judgment in the absence of an agreement, but the contract rate is applicable if you signed a contract. Lenders who flout these laws would have to forfeit as much as double the interest they received. However, these limitations do not apply to the regulated lenders, the Nationally-chartered banks, and the transactions between different merchants.
Repayment TermsOne of the important sections in the loan agreement is the one that breakdown how you will repay the loan amount offered. And you need to know that you play a significant role in making sure that the repayment terms aren’t too strict. So, regardless of how you feel about negotiations, roll up your sleeves and negotiate for a term that is acceptably by reviewing your relative bargaining power, your revenue projections, as well as your financial capability. The schedule you sign up for must be financially feasible for you and also flexible so that you can avoid defaulting.
DefaultYou can avoid defaulting your loan, and all you need to do is to work on ways and strategies to lower the risk of default. For starters, keep in mind the negative repercussions of defaulted payments on your personal or business finances, and keep the default provisions realistic. If you need to present your financial statements or business’ balance sheet to the bank/ lender periodically, then you should.
However, the best way for you to avoid defaults is to negotiate all the important default provisions. You could also soften these provisions by negotiating the inclusion of a generous cure period in case of a breach, the incorporation of minimum and even maximum dollar limits, addition of qualifiers (materiality or knowledge), as well as asking the lender to immediately stop the ramifications or penalties once a default is waived.
Basically, this negotiation requires you to take advantage of all opportunities, either to adjust or to delete harsh language used in your agreement’s default provisions.
CollateralWhile you might be confident in your abilities to repay the loan, you shouldn’t create a situation where you are forced to relinquish control or the ownership of your company. Always think about what you can take should things go sideways.
To get started with loan agreements in Missoula, Bozeman, Billings, Helena, Kalispell, Big Sky, Great Falls, or any other city in Montana, download our free loan agreement form today.