Innovative Financing Kicker for Interim Lender

Private lenders who step into the breach when funds are needed to acquire a site or keep a job moving until a construction or permanent loan is closed frequently look for ways to share in the upside of the project. Becoming a member of the borrower is fraught with difficulty – management time is required, definitions of profits are sometimes elusive and if the deal craters, there may be no profits to share. A recent lender in that position creatively asked for a fixed percentage of revenues of the borrower – no fight over profits needed. It was a condo project and the revenues should be easy to follow and double check. The lender’s counsel, however, did not have a form for the agreement – a first for me. So we drafted as borrower’s counsel. We decided to keep the agreement fairly straightforward and the lender agreed. It wouldn’t surprise me if it became a template for future deals. In these times, creative solutions may mean the difference between the success and failure of a deal. I’ll keep the blog updated on whether the arrangement worked.

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