Critical to monitoring and managing a lending relationship is establishing expectations with the borrower. The process begins with a term sheet which outlines the basis for discussing a possible lending relationship. The agreement between the borrower and the bank is formalized with a commitment letter.
As the bank analyzes the lending opportunity, the credit analyst identifies strengths in the credit, weaknesses in the credit and potential mitigates with the objective of minimizing any uncertainties in the proposed lending relationship.
The next step in the process is formalizing expectations with the borrower using covenants in a loan agreement. Affirmative covenants are intended to preserve the identified strengths. Negative covenants are designed to protect the bank from identified weaknesses. Fundamental to any loan agreement is a requirement the borrower provide periodic financial information.
The final step in the process is putting in place a framework for monitoring compliance with covenants and providing a clear understanding of events of default and remedies available to the lender in the event of default.
At the end of this webinar, participants should be able to:
- Define the objectives of a loan agreement
- Explain the continuum of a term sheet, commitment letter and loan agreement
- Identify key issues in loan structure which provide the foundation for a loan agreement
- Define the purpose and components of a loan agreement
- Define the role of covenants and identify financial and non-financial covenants
- Identify key covenants in loan agreements and define the objectives of the key covenants
- Understand the importance of monitoring compliance with the covenants in a loan agreement and the remedies available to the lender in the event the borrower defaults
- Explain the benefits of a loan agreement for the lender and the borrower
Who Should Attend: Lenders, Credit Analysts, Loan Documentation Professionals, Portfolio Managers, Problem Loan Specialists