What does a commercial loan agreement cost ? You may ask this question if you need a commercial loan for your business. Let’s explore this question and review general information about commercial loan agreements and their implications.
How Much Does a Commercial Loan Agreement Cost?
A commercial loan agreement sometimes referred to as a business loan agreement, is a legal contract that outlines the specific terms and conditions of a loan that a business owner borrows for business purposes.
It is common for a business owner to need a loan at some point in their business venture. Whether they use this line of credit to purchase supplies or secure an office space, the business owner must adhere to the loan terms to stay in good standing with the lender.
Unlike a personal loan, a commercial loan often has flexible repayment options and lower interest rates. These stipulations will all be covered in a comprehensive commercial loan agreement between the borrower and the lender.
A commercial loan agreement covers many important details regarding the line of credit, including:
- Total amount borrowed
- Payment due date
- Interest rate
- Late fees and penalties
Commercial loan agreements are complex financial contracts and need to be drafted correctly to protect the interests of both the borrower and the lender. For this reason, anyone entering a commercial loan agreement should have the agreement drafted or reviewed by an experienced attorney.
A lawyer familiar with commercial loan agreements will know what information the agreement must include making it legally binding.
Based on ContractsCounsel’s marketplace data, the average cost of a commercial loan agreement is $876.00 across all states.
Secured Commercial Loans vs. Unsecured Commercial Loans
The type of loan a business owner qualifies for will affect the commercial loan agreement.
There are two main types of commercial loans:
- Secured loan: This requires the business owner to own a piece of collateral that will be forfeited if they don’t repay the lender. Some business owners will use a property or a company vehicle as collateral. If the owner defaults, the lender has the right to seize the collateral. These loans are easier to obtain.
- Unsecured commercial loan: This is the riskiest loan for a lender because there is no collateral, and the lender will not be able to recover their losses if the business owner defaults on the loan agreement. Unsecured loans are more challenging to qualify for and require the business owner to have a good credit score, a low debt to income ratio, and proven income.
What is Included in a Commercial Loan Agreement?
Commercial loan agreements will change based on the lender and borrower's terms and conditions. Sometimes, the lender is a financial institution like a bank that will have its own contract. However, private entities like businesses and individuals can also execute commercial loan agreements.
If you are entering into a commercial loan agreement, the contract should include these terms and clauses:
- Contact information for the lender and borrower
- Total amount of money being borrowed
- Effective date and length of the loan
- Payment schedule
- Promissory note
- Collateral (if applicable)
- Interest rate
- Penalties for non-payment
- Governing law
These terms will vary based on the parties and agreed-upon terms, and commercial loan agreements are often negotiable.
Commercial Loan Agreement Projects
Commercial Loan Agreement Drafting
The lender most often drafts commercial loan agreements. The lender can be a financial institution, a business entity, or in some cases, an individual. It is always recommended that a lender hires an experienced attorney to draft their commercial loan agreement because if any terms or conditions are missing, it may leave them open to financial risk,
Before beginning the draft for a commercial loan agreement, a lawyer will meet with the lender to go over the terms and conditions that the lender wants to include in the contract. Once the lawyer has a good idea of what the lender is trying to accomplish, they can begin drafting the agreement.
Commercial Loan Agreement Review
When borrowers sign a commercial loan agreement, they take on a tremendous responsibility. If the collateral is involved, the borrower risks losing the property if they break the loan terms or can’t make payments. Therefore, it is vital that a borrower fully understands what they agree to when they sign a business loan agreement.
Before signing the contract, a business owner can hire a lawyer to review the loan agreement. The lawyer will ensure the business owner’s interests are protected, and the agreement is fair.
Commercial Loan Agreement Drafting Cost
A lawyer hired to draft a commercial loan agreement will charge the client for their time and services. This can include:
- Initial consultation
- Hours spent drafting the agreement
- Follow up meetings
ContractsCounsel’s marketplace data shows the average commercial loan agreement drafting costs are $1,000.00 across all states.
Commercial Loan Agreement Review Cost
Suppose a business owner hires a lawyer to review their commercial loan agreement before signing. In that case, they will be responsible for their own legal fees. However, review costs are generally less than drafting costs because they require less time from the lawyer.
ContractsCounsel’s marketplace data shows the average cost to review a commercial loan agreement is $720.56 across all states.
How Do Lawyers Charge for Commercial Loan Agreements?
Hourly Rates for Commercial Loan Agreements
Hourly rate fee structures are one of the most common ways that lawyers bill their clients for legal work. First, the lawyer will use this fee arrangement to provide the client with a set hourly rate. Then, if the client agrees to the rate, the lawyer will bill the client for the number of hours spent working on their case.
ContractsCounsel’s marketplace data shows the average hourly rate for a commercial loan agreement lawyer ranges from $200 - $350 per hour.
Flat Fee Rates for Commercial Loan Agreements
Flat fee rate structures are becoming more popular when a lawyer is hired for a specific project, like drafting or reviewing a loan agreement. Instead of keeping track of their hours, the attorney will estimate how long the task will take and come up with a fair flat fee rate to charge a client.
For clients, flat fee rate structures are beneficial because they know exactly how much their legal fees are from the beginning of the project.
ContractsCounsel’s marketplace data shows the average flat fee rate for a commercial loan agreement is $876.00.
Get Help with a Commercial Loan Agreement
Do you need help with a commercial loan agreement project? If so, post a project in ContractsCounsel’s marketplace to receive flat fee bids from corporate lawyers to handle your project. All lawyers on the ContractsCounsel’s platform are vetted by our team to make sure you are provided with top tier service.