For small business lending, the devil is always, always in the details. (Something true about every legal document.) A great reminder of that is a post about liens today in NYTimes.com’s You’re the Boss Blog.
When small-business owners consider a loan, their primary concerns are generally what you would expect: What is the interest rate? How big is the loan? What will the monthly payments be? But another issue often lurks in the background and gets overlooked. What liens will the lender take and how will that affect the owner’s ability to borrow in the future? If a lender does take a second or third lien position, the loan is riskier — and often requires a much higher interest rate. And that is why paying attention to the lien is critical. It is impoertant to think through the lien and collateral requirements of your lender to make sure that when you’re giving up first lien position on some or all of your assets, you’re getting the best possible loan return.
Read Full Story: “In Small-Business Lending, the Devil Is Often in the Lien“(NYTimes.com)
On the SmallBusiness.com WIKI: Accounting-Finance Hub
(Featured image: on Flickr via brittreints)