When a lender knows it has stepped over the line, it may ask the borrower to sign a waiver, releasing it from liability for previous misconduct. In return, it might agree to grant the borrower more attractive loan terms. Be wary of these releases, says Cappello. "Compare what you are gaining by signing the release with what you may be potentially losing. Once you sign that paper, you are foregoing your right to ever seek legal recourse for the bank's misconduct."
Finally, create a paper trail of your dealings with your lender. "If a lender promises something over the phone, follow up the conversation by sending the lender a written confirmation of what was said," notes Cappello. "If you have been allowed to skip a few payments and catch up later in the year, write the lender a letter thanking it for enabling you to do so. This establishes a history of business dealings with the lender and can come in handy if you must renegotiate terms with the lender or in worst-case scenarios, take the lender to court."
Jacobs is fortunate because he's a good record-keeper. He's hoping to use his records to persuade his lender to agree to new terms that will save his restaurant while making the new bank management happy.
"Everything is negotiable when it comes to business loans," says Thomas. "A lot depends on how bad the bank wants your new or continued business."
The bottom line, both attorneys agree, is to always be vigilant about the relationship with your lender, in good times and in bad. Otherwise, you can easily leave your business exposed to undue risk.
|Interview potential backup bankers in your community. Even if you're on good terms with your lender now, you never know when you might need a new one fast.|
- Cappello and McCann, (805) 564-2444, www.cappellomccann.com.