All Forum Posts by: Carlo D.

Don't touch this unless you can afford to lose the entire loan. Recovery on a single, charged-off unsecured business loan will likely be less than 10 cents on the dollar. If you decide to entertain this, due diligence will involve digging deep into the business financials to understand cashflow, solvency, and liquidity, his personal finances, and searching for any liens or UCCs in place. 

Given that he's got a long history in business but is struggling to cover $30k in Op-ex and marketing spend, my guess is that this is either not very well managed or is in distress. The fact that he expects $30k for 6 months on a 1.25-1.30 tells me that A) he's either borrowed in the MCA/alt funding/SME hard money space before or is aware of it and B) he's been turned down by the lenders he's already talked to. Coupled with the economic slowdown that's occurring, I'd be cautious to say the least. Borrowing this kind of money to fund aggressive spend on growth in a high gross margin industry is once thing; covering Op-ex shortfalls is indicative of near term distress. 

For docs, at a minimum, you'll want a promissory note, PG, loan agreement, and a security agreement to attach to whatever collateral you can reach. You'll also need to file a UCC, although you'll most likely be stacked behind a blanket UCC from some bank. 

Last thing - APR cap in NY was 65% last I checked. Check your math to make sure you're not violating this or your contract could be voided.

 Hi Carlo, I have a great lawyer recommendation who works here in the Ohio area. Happy to send over their contact over

 A transactional lawyer that is familiar with lending laws in your state. I can give you some referrals in Ohio if that is what you are looking for

I don't personally use them for loan docs... I prepare my own. But since we close a lot of hard money/private money deals we do see this firm involved frequently. I can attest to the doc sets being comprehensive and templates being excellent.
 

@Carlo D. There are law firms that specialize in this field. Privatelenderlaw.com comes to mind.

@Carlo D. Real Estate investor Association. If you search for the National REIA, they will list Local REIAs

@Carlo D.

What state? We use a firm that drafts all of ours. They are a lenders attorney and deal with a lot of creditor rights and draft all our docs for us (note, loan agreement, personal guarantee) and work with title on deed of trust

Title companies are insurance companies. They have attorneys but these are not your attorney, @Carlo D.  While a title company might provide a note and mortgage, it will not prepare a complete, bulletproof loan package.

Our package comprises over 20 loan documents including a note, deed of trust, personal guarantee, lender’s instructions, business purpose loan certification, entity certification, various federal and state compliance disclosures, and more. You will not receive all of these from a title company. To protect yourself, you need a specialist.

Just like you wouldn’t go to a cardiologist for a brain injury, you shouldn’t rely on a real estate lawyer for loan docs – unless this is their specialty. If it’s leases today, evictions tomorrow, and boundary disputes the day after, they may not be the right attorney for you. You need a lending and securities attorney.

There are some West Coast-based lending attorneys who work nationwide that I have recommended, but you might ask around regionally first. Call some local hard money lenders and ask who they use. Lending is a narrow specialty, so you’ll likely hear the same few names. These are who you want to choose.