You may sometimes need to borrow money, for example in order to purchase a building, machinery and equipment, or an entire business. There are different ways of obtaining loans. You may decide to use an external lender such as a bank or a leasing company, but equally you may wish to use a hire-purchase contract under which the obligation to pay the purchase price for the assets in question is converted into an loan that is repaid in instalments.
Whatever type of loan is chosen, the lender is well-advised to ask for some sort of security. The object of providing security is to give the lender an additional means of recovering its money if the borrower proves unable to meet its payment obligations. The security in question may either be ‘real’ (i.e. collateral security), such as a right of mortgage or a right of pledge, or personal, such as a guarantee or suretyship agreement. A right of lien (or ‘retention of title’) is another form of security: this involves a supplier retaining the title to goods supplied until payment has been made.
A transparent, carefully worded loan contract, backed by the right collateral, is of vital importance for lenders and borrowers alike. Our legal experts help their clients to avoid unpleasant surprises later on – such as the news that their security cannot be enforced because they failed to satisfy the procedural requirements for establishing it in the first place.
We can also help lenders, for example in cases of bankruptcy fraud, where they are faced with an application to set aside a fraudulent preference affecting the security they were given.
In view of the substantial interests often involved in loan contracts, it is important to engage us at an early stage. The old adage of ‘prevention is better than cure’ really does apply here.