Existing Debt and Raising Capital

by | Jul 29, 2015 | Business Agreements

Before you launch a capital-raising campaign for your emerging business, call your attorney. It is crucial to have your small business attorney review your existing financial agreements. An experienced professional will review for any requirements or hidden issues that could hinder securing new capital.
Many financial documents, such as bank loans, real estate agreements, and leases, could contain clauses that might prohibit or restrict the business from carrying additional debt. In some cases, these restrictions may be amended, and your attorney can help you determine the best course of action.

Your attorney will review your company’s contracts and agreements for the following provisions:

  • Lien-holders and additional lien restrictions.

If an existing creditor holds a lien on your company assets. That contract might prohibit you from using those assets to take on additional loans or debt.

  • Ownership or entity change.

A contract with a creditor might include clauses prohibiting a change in ownership or business entity status. This provision could last for the duration of the loan.

  • Debt pay-off.

An existing creditor might include a clause that any new loans or capital must be used first to pay off that debt.

Your attorney can help you determine if there are any contracts that need to be amended or help uncover hidden financial obligations prior to the launch of your capital-raising plan. Do your due diligence prior to raising capital to help protect yourself from these hidden concerns.

Contact EmergeCounsel for more information on legal services for your emerging or small business.


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