Terms that decide later disputes
Loan agreements and disputes are closely connected, because many disputes are decided by terms negotiated long before. Definitions of EBITDA, permitted debt, or change of control determine whether a default has occurred. Cure periods, notice requirements, and cross-default provisions affect how quickly a lender can act. Guarantees and security documents decide who else is exposed, and personal guarantors often have positions that differ from the company's. Jury waivers, forum clauses, and governing law provisions, commonly New York, shape how litigation would proceed. Borrowers negotiating a new loan should focus on these provisions, not only the rate and amount.
When a covenant is tripped
A lender's first response is often a reservation-of-rights letter, preserving its remedies without immediately acting. Borrowers may seek a waiver or amendment, and lenders frequently request fees, tighter covenants, additional collateral, or a release of claims in exchange. A forbearance agreement can provide breathing room but usually includes acknowledgments of default and releases that limit later arguments. Collect the credit agreement, amendments, compliance certificates, and all notices, and avoid informal emails that concede a default or propose terms before the implications are reviewed. A guarantor should get its own advice on any forbearance terms, because releases and reaffirmations in those documents often reach the guarantee as well.
Before litigation starts
In a first discussion we read the default provisions against the facts to see whether a default actually occurred and whether it can be cured. For borrowers, we evaluate negotiation leverage and alternatives such as refinancing or restructuring. For lenders, we review enforcement options and their sequence. In some private lending, including merchant cash advance arrangements, the threshold question is whether the transaction is a loan at all, which can raise usury issues under New York law. We also consider whether a bankruptcy filing by the borrower would change the picture.
