Bank loan document is standard form, right?

Provided by:  Jennifer Kirschenbaum, Esq.

August 14, 2018

Question:

Hi Jen, 

Happy August!  I am taking a loan for my practice from BOA and I received my loan document.  Should I send it over or can I just sign it since its probably a standard form, right?

Thanks, 
Dr. L


Answer: 

The Loan document you received is a form, but also not.  The basic construct (without seeing what you were sent) is likely the same as what the bank uses for everyone but with your details in it.  And, the devil is always in the details.  You want to confirm the terms of the loan are what you negotiated for - interest, principal available, repayment requirements, unused commitment fees and the covenants.  The covenants is where you may be tying your practice to promises to the bank that could disrupt your business.  Are you required to maintain and produce financial information you do not normally keep?  Are you agreeing to use the proceeds by contract in ways other than you intended? Are you agreeing to a minimum liquidity requirement you can't actually maintain? Are you agreeing to subordinate or abstain from conduct necessary for your continuing operation?  All of these particulars are unique to your practice and your relationship with the bank.  You may also be signing on to a continued banking relationship you have no intention to keep.  As boring and mundane as your loan document reads, it is worth reading and having reviewed.  Do not sign on the dotted line just because you think you do not have leverage, or, even worse, you think everyone else signs without asking questions.