Lease Matters Can Impact A Business' Loan Eligibility

What happens in the negotiation of a commercial lease with a landlord can have major implications for a business’ future. It could even impact the business’ ability to get a loan. Roadblocks to getting a loan could get in the way of all kinds of goals for a business.

What happens in negotiations can heavily impact what terms a lease ends up having. These terms can impact a company’s overall financial situation, which can affect loan eligibility.

Also, some lease terms can have a more direct effect on a business’ ability to get a loan. One such term is a term giving the landlord rights to collateral of the tenant in the event of a failure to pay rent. Given the rules regarding SBA loans, having such a term in a commercial lease could block a business from being able to get this type of loan if it isn’t able to get its landlord to agree to subordinate the rights this term gives.

Given how many things the terms of a commercial lease can impact, the representation of a skilled business lawyer can be a critical thing for a company to have when it is in lease negotiations regarding a property it wants to rent.

Now, if a business does end up with a lease containing a term giving the landlord collateral rights, and the business does desire to get an SBA loan, whether it is ultimately able to get the landlord to sign a subordination agreement could have major impacts on its overall goals. As this shows, negotiations of the initial lease are not the only impactful negotiations a company can end up in with its landlord. Post-lease negotiations are another area in which skilled attorneys can give guidance to businesses.

Source: Forbes, “7 Things That Could Throw A Wrench Into Your Small Business Loan Plans,” Jared Hecht, Oct. 27, 2016

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