Overview: This course is designed to introduce students to commercial loan transactions. The course starts by defining commercial finance in general and identifying the purpose of loan transactions. It then describes the common types of loans and identifies the components of a commercial loan transaction. Subsequently, the course identifies the key documents in a commercial loan transaction and describes the role of commitment letters and term sheets. Finally, the course identifies the essential roles transactional attorneys play in commercial finance transactions.
Objectives: Upon completion of this course, participants will be able to:
- Identify the typical structures for commercial finance transactions
- Differentiate between different types of commercial loans and available sources of funds
- Recognize terminology used in commercial loan transactions
- Understand the role and type of financial covenants found in commercial loan transactions
- Review and summarize a typical commercial loan term sheet
Key Topics:
- What is commercial finance?
- What do we mean by commercial finance?
- Why is commercial finance important for businesses?
- Commercial finance key terms
- Common types of loans
- Term loans
- Revolving lines of credit
- Project loans
- Real estate loans
- Components of a commercial loan transaction
- Determining the type of loan
- Structuring the transaction
- Drafting the loan documentation
- Closing and refinancing of existing indebtedness
- Key documents in a commercial loan transaction
- Role of commitment letter/term sheet
- Purpose of a commitment letter and term sheet
- Interest rates
- Floors and caps on variable loan rates
- Commitment/origination fees & other out-of-pocket expenses
- Roles of transactional attorneys in commercial loan transactions
Supplemental Materials/Additional Resources:
- Sample term sheet
- Sample commitment letter
- Sample credit agreement
- Sample note
- Sample guaranty
Simulation Exercise: Students are presented with a banker that has reached out regarding a proposed credit facility consisting of a term loan and a revolving loan facility that the bank team has greenlighted for approval. Students are asked to (i) prepare a commitment letter that commits the bank to legally provide the credit facility and (ii) provide a succinct term sheet that spells out the salient terms for the borrower.
