Commercial Loan Fee Agreements

Borrowers should beware of commercial loan fee agreements. In some cases the commercial loan broker/lender/business is not regulated. For this reason you are not protected like you are when you pursue traditional consumer financing. Keep this in the back of your mind as you engage in any commercial project that needs financing.

I’m not suggesting that you should take a cynical approach to the process, but a reserved and cautious approach is necessary. Many lenders will promise you the world and deliver a term sheet for your loan that is very different than what you were told.

READ your commercial loan fee agreement. Make sure you know what you are committing to when you sign it. It is important that you and your broker/lender are clear on your expectations. Some fee agreements deem the commission earned when a commitment letter is issued and countersigned. That means if you don’t close for any other reason of your control, you will still be held accountable to pay that broker/lender fee.

A good rule to follow is to ask when you don’t understand something in the agreement. Assumptions lead to miscommunications, miscommunication can lead to financial losses or legal battles. Give yourself enough time to review the paperwork involved in the commercial loan process.

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