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ARTICLE · 16 JULY 2024

5 Key Considerations When Entering Into A Loan Agreement

Lewis Silkin
Lewis Silkin
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Lewis Silkin

Lewis Silkin

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Entering a loan agreement requires careful consideration of breach consequences, change of control clauses, borrower restrictions, and lender assignment rights. Negotiate terms to ensure operational flexibility and obtain necessary consents for significant business changes during the loan term

United KingdomFinance and Banking
Leah Glover
Leah Glover
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Lending agreements can be quite restrictive on borrowers. If your business is entering into a loan agreement, this article outlines some key considerations for borrowers.

1. Consequence of a breach

Loan agreements typically contain the right to 'accelerate' the loan should a term of the agreement be breached. This means that the entire amount of the loan is immediately due and repayable. For many borrowers in long term debt arrangements, this could cause significant financial distress, and in some cases, result in an insolvency situation. This is why it is imperative that the terms of the loan agreement are carefully considered before it is entered into to ensure that:

  • they are not going to be easily breached by the borrower; and

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