Money is the lifeline of any business, Douglas Park advises commercial borrowers on a variety of financing techniques and lending issues. Furthermore, Mr. Park helps structure, negotiate and document commercial credit transactions.
Below are some of the different types of financing transactions and concepts:
Attachment – to take all steps required under applicable law to give a creditor the right to enforce a security interest against the borrower. Generally, a security interest will not attach to a borrower’s assets until the lender has given value (e.g. extended the loan), there is a contract in place setting forth what assets are collateral for the obligation and the borrower has rights in the applicable asset.
Asset Based Lending (“ABL”) – a type of loan where the amount of credit is based upon a percentage of the value of the borrower’s assets.
Cash-flow Deal –a type of loan where the amount of credit is based upon a multiple of the borrower’s earning.
Collateral – the assets supporting a loan. The lender should ensure that it has a perfected security interest in any collateral as part of the loan documentation process.
Convertible –the debt instrument can be converted upon the occurrence of certain events into equity of the borrower.
Factoring – a transaction where the “borrower” sells its accounts receivable to a third party at a discount in exchange for an upfront payment.
Guaranty – an agreement by a non-borrower to repay a loan in the event the borrower fails to repay.
strong>LIBOR –an average interest rate based upon lending rates charged by certain London banks.
Perfection – how a lender notifies all other potential creditors of the Lender’s security interest in the Borrower’s collateral. The steps necessary to perfect a security interest depend upon the nature of the collateral, but can include filing a financing statement with the Secretary of State, physically possessing the asset or obtaining a writing agreement from a third party that they will hold the asset for the benefit of the Lender.
Revolving – a type of loan that can be borrowed, repaid and re-borrowed. Revolving facilities are often used to finance inventory.
Security Interest – a lien on an asset that gives a lender a right to sell the asset and use the proceeds of the sale to repay the loan.
Syndicated – a loan deal where multiple lenders are participating in one or more loans to a borrower.
Term Loan – a type of loan that is borrowed in one lump sum and then repaid pursuant to an amortization schedules. Term loans cannot be re-borrowed once repaid and are generally used for large one-time expenditures.