October 10, 2013
Send Your Accountant Your Proposed Loan Agreement
Having your accountant look at your proposed loan agreement is a good idea. We often find covenants that can't be met that can be negotiated away. (For example, the debt service coverage ratio). Occasionally, loan agreements will ask for accrual basis financial statements. In industries such as real estate, income tax basis financial statements are generally provided. Having the loan provider change the loan agreement to the type of financial statements normally issued by you saves a host of later problems and money. Also in this light, financial covenants need to be fully understood, as it is often the case they are near impossible or expensive to meet. A full understanding of loan provisions beforehand helps both you and the loan provider.