Debt Financing

Lifecycle of the loan

A loan is a sequence of moments where control shifts from you to the lender. This section follows it in time order, from term sheet to foreclosure, and shows where the leverage sits at every stage.

A loan is not a document you sign and then service. It is a sequence of moments, and at each one, control shifts a little further from you to the lender. Before the term sheet you can walk away from anything. After the commitment you are bound and the lender is not. After closing you owe, and a servicer you never chose holds the file. After a default the lender holds the remedies. After a receiver is appointed you hold the title and nothing else. This section follows the loan in time order, and its subject is where the leverage sits at every stage, because it is never where the borrower assumes.

A loan is a sequence of moments where control shifts from you to the lender. Your leverage is highest before the term sheet and near zero after the receiver.

The stages run from the term sheet and the commitment, through underwriting and the closing scramble, into servicing and the quarterly covenant tests that decide whether the loan stays quiet, then to default and the notice-and-cure mechanics, the workout and the document that opens it, and finally receivership, foreclosure, and the deed in lieu, where the deficiency lands on the guaranty. Every stage links to the pages that teach its mechanics; this section teaches the sequence and the shifts.

The seven pages are below, in the order a loan lives them.

Inside this hub

Your leverage over a loan runs backwards

You have the most power over a loan before you sign and the least when it fails. Everything worth negotiating has to happen at the start, because the sequence only takes power away.

The term sheet binds you, not the lender

A term sheet binds you to a deposit, exclusivity, and expenses, and binds the lender to nothing. The commitment letter binds the lender, subject to conditions the lender controls.

Underwriting and the closing scramble: where deals slow, shrink, and stall

Closing stalls on the checklist, not the economics. The appraisal can shrink the loan, the estoppels can delay it, and the entity paperwork can stop it, all in the final week.

Servicing: the quiet years are when the loan is tested

After closing the loan goes quiet, and quiet is when it is tested. Every quarter a covenant is measured, and a failed test is a default with every payment current. Who measures it depends on who holds the loan.

Default, notice, and cure: the clock that turns a breach into a foreclosure

A default is whatever the documents define, not just a missed payment. Notice starts a clock, the cure period is your window, and acceleration is when a breach becomes a foreclosure.

The workout: the document that opens the conversation and closes your leverage

The first thing a lender sends in a workout is a pre-negotiation agreement, and it exists to strip the borrower's one real leverage: the lender-liability claim. Sign it with counsel, and do not release for free.

Receivership, foreclosure, and deed in lieu: how the loan ends

Before the loan ends, a receiver can run your property while you still own it. Then it ends by foreclosure, deed in lieu, or a receiver's sale, and the deficiency lands on the guaranty.

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Debt Financing 58 Your leverage over a loan runs backwards You have the most power over a loan before you sign and the least when it fails. Everything worth negotiating has to happen at the start, because the sequence only takes power away.

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