In most cases, business owners will need some form of financing to help them get their businesses off the ground and keep their doors open. No matter how small or large of a loan you need, you want to do everything you can to avoid being on the receiving end of a bad loan.
Choose Your Collateral Carefully
Before you offer up your home or car as collateral for a loan, think about the impact it would have on your life if you were to actually lose either one. Any security you offer should be something you can live without, not the most expensive asset you own. Bear in mind that some lenders ask for security from borrowers as well as a guarantee from a corporate officer of the business or a deed of trust on your property. Under these circumstances, both you and your guarantor are at risk of taking a loss, mainly because the financing terms allow for foreclosure.
Get Everything in Writing
Every term and detail of your loan needs to be put in writing and signed by all parties involved with financing. No matter how well you may get along with a lender, you have to realize this individual might not hesitate to renege on an oral agreement or promise. Not only does getting everything in writing offer you better legal protection, but it also makes sure everyone understands the terms of the agreement. Once you’ve got everything in writing, have it looked over by an attorney. This might seem a bit like overkill, but you have to remember that the future of your business could be on the line should disaster strike.
Know What You’re Getting Into Before You Get Into It
Don’t agree to a loan on the spot. There are times when legal stipulations that are intended to prevent fraudulent lending can severely inhibit a borrower’s legal options should things take a turn for the worse. Read over every page of your loan, and be sure to ask for clarification if there’s anything you don’t understand. This is another time where the help of an attorney will be indispensable.
Something to bear in mind with seeking out legal help is that in the future you may not be able to claim you were being taken advantage of, mainly because the lawyer who looked over the agreement should have informed you of a potentially precarious situation. For that reason, make sure you have the loan contract looked over by a trusted and experienced legal professional, even if it means paying good money for her or his services.
It’s Best Not to Sign Jury Trial Waivers, Releases or Arbitration Clauses
If you notice any of the above waivers, terms or clauses in your loan agreement, it’s best you not sign it. The reason for it is that you might be signing away your options for legal recourse. Lenders who are concerned about claims might include liability releases in their agreements. Should any wrongdoing take place during the life of the loan, you’ll have given up your rights to file a claim.
Study Up on Your Rights
Educate yourself on the rights you have as a borrower, which can be found online and at your local library. While you may already be aware there are rights in place designed to protect you as a borrower, you should know exactly what those protections are and if they have gone through any changes that might impact your loan.
Not every business loan will go poorly. But just like you take out an insurance policy for an incident that hasn’t yet occurred, it’s best to be well prepared for the worst. After all, it’s your business that’s on the line. Safeguard it and your sanity at all costs.
The content on our website is only meant to provide general information and is not legal advice. We make our best efforts to make sure the information is accurate, but we cannot guarantee it. Do not rely on the content as legal advice. For assistance with legal problems or for a legal inquiry please contact you attorney.