Following up on the recent articles in Billboard Insider, I thought it would be beneficial to talk about the representations and warranties that lenders require. Typically, if you borrow, these reps and warranties are non-negotiable. They start the first day you borrow and extend “at all times any indebtedness exists.” (Quotation marks indicate text from an actual bank loan agreement.)
What exactly is included will depend on the lender, but these are some of the common reps and warranties a borrower must agree to:
Organization – you must attest to the type and legality of the entity; the legitimacy and legality of your business in all places where you do business; and that you will continue to follow all laws, regulations, and rules that pertain to your entity and business.
Authorization – you must attest that all documents have been executed by duly authorized individuals in accordance with your own articles and bylaws; existing third-party agreements; and all laws, regulations, and rules that pertain to your entity and business.
Financial Information – you must attest that provided financial information “truly and completely disclosed” your financial condition and that there has been “no material adverse change” subsequent to the information provided.
Legal and Binding Effect – you must attest all loan documents are binding and legally enforceable upon the signers, “as well as upon their successors.”
Properties – you must attest that you have clean and unencumbered title to the out of home property pledged to the lender as collateral, which could be the common pledge of all assets “whether now owned or hereafter acquired.”
Litigation, Claims, Taxes, and Lien Priority – you must attest that everything has been disclosed, your documentation is in order, and that priority belongs to the lender.
Your Loan Documents will cover each of these reps and warranties in great detail – this is only a brief summary. Lenders go above and beyond to cover every possible detail in the loan documents so you can’t use the defense that you did not know something. You will probably have to supply documentation to validate your reps and warranties such as a good standing certificates, operating agreements, permits, licenses, receipts, tax returns, etc.
Your lender is your financial partner, and important elements of a successful partnership are open communication and full disclosure. Lenders want you to succeed and repay them as agreed because the alternative is very costly for everyone. Please make sure you understand what your loan documents say and require.
Ken Altena is a partner in Billboard Loans, LLC., a private lender which makes loans and equity investment of up to $1 million in out of home advertising companies. You can reach Ken at kenaltena@billboardloans.com, 206-636-8478
To receive a free morning newsletter with each day’s Billboard insider articles email info@billboardinsider.com with the word “Subscribe” in the title. Our newsletter is free and we don’t sell our subscriber list.
Paid Advertisement
