Most business contracts of sale are subject to finance and unless you, as the buyer, approve or waive the finance condition under the contract by the due date, the seller has the right to terminate the contract. Before you approve your finance pursuant to the contract, you must obtain a letter of approval from your financier and preferably give a copy to your solicitor for their perusal.
Here are some common pitfalls to look out for with letters of finance approval.
Most banks provide their standard letter which simply states that your finance is approved.
You, as the buyer, must ensure two things:
that the finance approved is unconditional
that the finance letter of approval documents the essential terms and conditions of your loan.
A satisfactory letter of approval should be unconditional and include the following:
the correct name of the borrower
the loan amount
the term of the loan
the interest rate (both the higher and the lower interest rates)
the default interest rate
the repayments on the loan amount
the security mortgage
the guarantors (if applicable)
any special conditions of the loan.
All buyers should beware of satisfying their finance condition under the contract without having an acceptable letter of approval from their financier. You do not want to be in a situation where you have approved your finance based on a verbal approval or a simple letter from your financier only to find that approval was subject to certain requirements or based on different terms and conditions of the loan than you had expected.
Text by Hatzis Lawyers - NetNews
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