Recently, a mid-sized company asked me to advise on refinancing by one of the major banks. The bank for which I had acted for many years. The existing financing was no longer adequate due to strong growth and changed circumstances. Termination of a loan, an acquisition or investment could also be reasons for refinancing. During a booming economic period, a regularly heard ground is that people want more favorable financing terms. During economic downturns, the bank may insist on changes, such as to avoid termination of financing.
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When refinancing, also check the legal aspects
Whatever the reason for a refinancing, it is always good, as this company did, to not only look at the financial aspects, but also to have a legal review of the structure and terms of the financing. That's where a lot can be gained.
Clients sometimes do not sufficiently realize that changes in structure of financing - loans, overdrafts, bank guarantee facilities, etc. - and maturity affect terms. As a result, interest rates can be lowered, for example, or more flexibility in repayment is possible.
Funding scale balanced
It is also worthwhile to scrutinize requested collateral, such as mortgage and pledge 403 statements and surety bonds. The financing scale, with financing on one side and the value of the requested collateral on the other, should be more or less balanced. However, banks try to get as much collateral as possible. The collateral once provided usually cannot serve as security if there is a need for more financing. In the event of any recourse, the bank's advantage over other financiers or unsecured creditors may be disproportionate.
Legal check makes money
In the case of the company seeking advice on refinancing, the advice was not to agree to a lien on savings. The financier agreed to this. This very significantly increased the company's liquidity and freed up money for other things, such as dividend payments and investments.
When refinancing, it pays to have the financing documentation legally reviewed. This is how we often manage to gain a lot for our clients! Also interested in a check or need advice? I am happy to be at your service.
