A Borrower’s Toolkit for COVID-19

A Time for Conversation with Your Lender – What to Ask and What to Ask For

As we move into the second quarter of 2020, companies are faced with assessing the negative impacts of the COVID-19 virus on their financial and operational performance. Most companies are seeing a significant decline in revenue and are having to react quickly to adjust their cost and expense structure to the current economic situation.

If you are a company with leverage, you have probably already been in touch with your lender to discuss any immediate needs for liquidity and negative impacts on your business. Now comes the bigger question of what amendments are necessary to your loan agreement in order to allow you to move ahead and manage your business through the COVID-19 crisis.

Lenders have a vested interest in your operational and financial success.  Our sense over the past few weeks is that lenders have the attitude that “We are all in this together.” As such, it is imperative that you establish and maintain trust with your lender. The more open, honest and frank you are with your lender, the better chance you have in maintaining the lender’s support of your business through the downturn.

The first step in establishing and maintaining this trust is to know your situation and know what terms and conditions are in your loan agreement. All loan agreements are different, and you will need to review the provisions carefully as definitions, covenants and defaults vary from deal to deal.

We have identified four general areas of your loan agreement that will be most impacted by COVID-19 financial stresses, these include:

  • Upcoming Payments and Amortization
  • Financial Covenants and Definitions
  • Reporting Requirements and Notices
  • Events of Default

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For more information or advice on how to communicate with your lenders during this time, contact Michael Levy.

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