Independent legal advice – granting loan security
Explore how our solicitors help borrowers to secure business and personal loans
Contact our teamExplore how our solicitors help borrowers to secure business and personal loans.
Banks and other lenders often require security from business and personal borrowers, the business’ owners and directors and their spouses, when providing a substantial loan. They also often demand the borrower or security provider obtains independent legal advice and evidence that they understand fully what assets are at risk and how. Indeed, the law encourages them to do so, and the courts have even recommended or mandated how such providers of security must be advised. This is where Moore Barlow can help.
In order to reduce the risk of a court refusing to enforce the bank’s rights, the bank usually ask the borrower to find an independent firm of solicitors to certify that they have advised the security provider fully and independently. They are also asked to certify various other items, such as the identity of the security provider, the due execution and witnessing of documents and the absence of apparent duress.
Sometimes, the lender goes much further than the courts have recommended and asks for much more. This is especially true of new entrants to the market (e.g. non-bank lenders and commercial lenders) and providers of asset based or short-term finance (e.g. bridging loans).
How Moore Barlow can provide independent legal advice
At Moore Barlow we are very experienced at delivering this advice and certification as independent legal advisers. We deal with all the major banks and most non-bank lenders. We understand how they work and what they need.
We are familiar with the instructions to solicitors which the lender will issue and how they vary from lender to lender. We will help you by:
- delivering what the lender needs without compromising the protection you need;
- ensuring that you fully understand your liabilities and risk and inform you what your options are (especially if the lender is asking for more than it needs or is out of kilter with the market);
- helping you to negotiate anything you are not willing to agree to; and
- working with you and the lender to achieve the outcome you want.
For example, you may have agreed a cap on your liability as a guarantor and we will always make sure that that cap is clear and legally enforceable.
Our guidance is professional but at the same time personal, ensuring pragmatic and tailored solutions to support your business funding goals. We are focused on working with you to deliver everything on time with no hidden charges and a responsible communication method to ensure transparency within the process.
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What is security for a loan?
A loan security is an asset or a promise which a borrower or third party provides to a lender to ensure the lender can recover the loan, its interest and its costs. This ensures that the borrower poses a lesser risk to the lender.
The most common forms of security are:
- charges on the assets of the business (eg a debenture or fixed charge);
- personal guarantees;
- a charge on a residential home;
- charges on other real estate (eg commercial property);
- charges on shares;
But some lenders will accept other high value assets (eg bank accounts). If the borrower defaults, the lender has the right to sell the secured asset to recover its loan, the interest and the costs. Such a secured loan usually comes with a lower rate of interest than a riskier unsecured loan.
Contact us today
Our team has the knowledge and experience to help businesses achieve their financial goals and protect their interests. With a focus on delivering practical, commercially-minded solutions, we work closely with clients to understand their unique needs and provide tailored advice and support every step of the way.
We have offices in London, Richmond, Southampton, Guildford, Lymington and Woking and offer specialist corporate legal services to clients nationwide.
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