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Business lending can lead to high-stakes legal disputes

On Behalf of | Aug 15, 2023 | Business Law

Businesses are in constant need of capital in order to continue to operate. If they cannot raise capital through investments, then a Dallas-area business may have to get a loan — especially if it is just getting off the ground or if has run into some unexpected financial difficulties.

Commercial lending is a bit different than taking out a mortgage or getting a credit card or other consumer loan. It is more involved, and the terms of any loan are open to more back-and-forth negotiation.

The loan agreement may be unique, drafted just for the transaction. Also, many businesses may get loans from a number of sources other than a well-known bank. Even private individuals such as relatives, friends or just community members willing to take a risk may offer a business loan.

As with all loans, when things go well, the business can continue to operate and will pay back the loan as its creditors expect. However, there can be legal disputes about these loans.

Perhaps most commonly, a business might not be able to make their payments as expected and will need to try to renegotiate the loan.

On the other hand, creditors may cause legal issues as well. They may try to charge for items or enforce terms when the business has no legal obligation. The creditor may even claim the business is in default or financial distress when that is not the case.

These disputes often have high-stakes consequences for a business. In some cases, a creditor’s foreclosure or other actions may even cripple a business and force it to close its doors.

What if I get into a dispute with one of my creditors?

Resolving a dispute over a loan is not always a straightforward matter. A business’s creditors may draw a hard line on their position, making negotiations more difficult.

Furthermore, these disputes may require detailed knowledge of contract terms and the law in general. Of course, businesses also have to be mindful of their financial and other business resources.

Texas business leaders who are in a dispute with a creditor should make sure they understand their options so they can decide what is best.