Correspondence with Lenders

What is Correspondence with Lenders?

Correspondence with lenders are financial documents that include any communication in the form of letters, notices, reports and filings, between your company and lenders.

These include:

• Amount and Type of loans or debts provided by lenders
• Interest Rates applicable to your current and future loans
• Terms and Conditions on loans provided, including collateral, performance targets (covenants), payment schedule and plans and your existing compliance with requirements
• New Loan Options or changes to existing loans

Why is Correspondence with Lenders important for business today?

Having a comprehensive set of all correspondence with lenders enables your company to:

• Gain visibility into the amount, interest rate, duration and terms and conditions of various loans
• Assess your compliance with the covenants stipulated by lenders and understand penalties for non-compliance
• Take action on any changes in terms and conditions and seek timely requests for any delays in obligations
• Formulate a strategy to manage your company’s cash flow position by evaluating historical loan transactions
• Assess new loan options available to your company and the associated costs
• Manage your collaterals more efficiently
• Keep a record of any particular issues that have arisen with your lenders in the past and develop strategies to resolve these issues

Why is it important for an event tomorrow?

Having a comprehensive set of all correspondence is important for an event tomorrow, as it helps potential investors to:

• Evaluate your company’s current liabilities and their terms and conditions
• Assess the financial and operational covenants applicable to your company
• Evaluate outstanding loan amounts and the repayment capability of your company
• Assess the preferred lenders and negotiation skills of your finance department
• Determine and analyze your company’s credit rating or score
• Assess your company’s ability to deal appropriately with debt collection agencies
• Understand any particular issues that have arisen with your lenders in the past and how they have been resolved

Pros of Correspondence with Lenders

• Provides documentary evidence to mitigate future legal risks and conflicts
• Increases compliance with lenders’ terms and conditions and covenants across jurisdictions
• Helps maintain consistency and transparency in communication between lenders and your company across various group entities

Cons of not addressing this topic

• Increase in risk of disputes and defaults, as loan transactions are not tracked and documented
• Restriction on your company’s ability to track any changes in lender terms and conditions
• Increases time and cost of due diligence for both internal company management and potential investors.