Willcox, Buyck & Williams, PA Blog

Wednesday, June 27, 2018

7 Things to Watch Out for in SC Commercial Loans

You may need a commercial loan to provide funds for operating costs for your company, a construction project, or capital expenditures. Commercial loans include real estate loans and business loans secured by personal property. If you are a lender or a borrower in a commercial loan transaction, you need experienced South Carolina banking lawyers working for you to protect your interests.

Below are several things that you may not know about commercial loans in South  Carolina.

1. Other collateral may be required to secure a commercial loan.

In addition to real estate, a commercial lender may require additional collateral to secure the loan. Examples of assets that may be used to secure a commercial loan include equipment, fixtures, accounts receivable, general intangibles, inventory, bank or trade accounts, and supplies.

2. You may be required to assign rents and leases as part of the commercial loan.

If you intend to develop the commercial property to rent or lease to other parties, you may be required to assign those rental and lease agreements to the commercial lender to secure the loan. In the event you default on the commercial loan, the lender can collect the rent and lease payments.

3. An environmental indemnity agreement may be required.

Depending on the type of business that is expected to be operated on the commercial property, the lender may require an environmental indemnity agreement. An environmental indemnity agreement holds the lender harmless for losses or claims arising from environmental contamination.

4. Personal guarantees may be required as part of the commercial loan.

In addition to requiring collateral to secure a commercial loan, the lender may also require personal guarantees from owners, partners, investors, members, or shareholders of the company. A personal guaranty is a promise to pay the debt owed on the commercial loan if the borrower defaults on the loan. The commercial lender can pursue legal remedies against guarantors if they do not pay the debt, including collection against the guarantor’s personal assets.

5. An assignment of a construction contract and related documents may be required for the commercial loan.

If you intend to use the commercial loan to finance a construction project, a commercial lender may require an assignment of the construction contract and related agreements and contracts. The assignment allows the lender to continue the construction if you default on the loan to protect its investment in the property.

6. Some commercial loans include a prepayment premium or penalty.

Some commercial lenders use a prepayment penalty or premium to compensate the lender for the loss of the anticipated revenue stream if a loan is paid in full before the maturity date. A prepayment penalty can add a significant amount to the payoff the commercial loan, depending on the terms and the timing of the payoff.

7. When real estate is used as collateral, an attorney must handle the loan closing.

In South Carolina, if a real estate mortgage is being used to secure real property as part of the commercial loan, an attorney licensed to practice law in South Carolina must handle the loan closing.

Contact Our South Carolina Banking Lawyers if You Have Questions

If you have questions about a commercial loan, contact our South Carolina banking lawyers at Willcox, Buyck & Williams, P.A. We can assist you with all matters related to commercial lending.


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