Definitions: Definitions and vocabulary are the basis of
language and communication. This is also true for legal agreements. How things are defined can dramatically affect the terms
of a loan, including how friendly a loan is to a borrower versus
a lender. For more complicated loan agreements, definitions of
seemingly innocuous terms, such as “Material Adverse Effect”
or “Default”, can have profound impacts on the loan.
Loan: How much is the loan? It’s important to look beyond
a number. Many loans have a stated amount, but the actual
amount that may be borrowed could vary dramatically. For
example, some loans may have accordion features that allow the
size of the loan to expand. Some other loans may have conditions on the loan so that the maximum loan amount may never
truly be borrowed. Pay attention to the mechanics of when a
loan may be made and how it is made. It may give you insight
into how the loan will be used and what it is used for. Look
for language that discusses, minimums and maximums, and
conditions that trigger changes.
Interest: The interest payments in EB-5 loan structures are important because they provide the SPV that acts as the lender with
operating cash. The lender may need the operating cash to take
care of expenses and to provide EB-5 investors with allowable
payments. If a structure has interest that is too low, look to ensure that there are other funds to operate the SPV. Related party
transactions often have low rates. Pay attention to when interest
begins to accrue and when payments of interest are made,