The SBA Lessor`s Agreement: Understanding the Basics
If you`re a small business owner, you may have heard of the Small Business Administration (SBA) and its mission to support small businesses through loans, counseling, and other resources. One of the SBA`s programs is the Certified Development Company (CDC) loan program, which helps small businesses secure financing for real estate and equipment purchases. As part of this program, the SBA requires a Lessor`s Agreement between the borrower and the lessor of the property or equipment.
What is a Lessor`s Agreement?
A Lessor`s Agreement is a legal document that outlines the terms and conditions of the lease between the borrower and the lessor. In the context of the SBA`s CDC loan program, the Lessor`s Agreement is a requirement for loans that involve the purchase or construction of real estate or the purchase of major equipment. The agreement ensures that the borrower has a legal right to use the property or equipment for the purpose of the loan.
Why is the Lessor`s Agreement important?
The SBA requires the Lessor`s Agreement to protect the interests of both the borrower and the lessor. For the borrower, the agreement ensures that the property or equipment will be available for the duration of the loan and that the borrower has the legal right to use it. For the lessor, the agreement provides assurance that the loan payments will be made on time and that the property or equipment will be used for its intended purpose.
What are the key terms of a Lessor`s Agreement?
The terms of a Lessor`s Agreement will vary depending on the specifics of the lease and the loan. However, some common provisions include:
– Description of the property or equipment being leased
– Identification of the borrower and the lessor
– Duration of the lease
– Amount of rent or lease payments
– Payment schedule
– Maintenance and repair obligations
– Insurance requirements
– Termination and default provisions
What should borrowers do when obtaining a CDC loan?
If you are seeking a CDC loan from the SBA, it`s important to understand the requirements of the program and the documentation that will be required. This includes the Lessor`s Agreement, which will need to be signed by both the borrower and the lessor. Before signing the agreement, be sure to review it carefully and seek the advice of a qualified attorney if you have any questions or concerns.
In conclusion, the SBA Lessor`s Agreement is a critical component of the CDC loan program. By understanding its purpose and key provisions, borrowers can ensure that they are complying with SBA requirements and protecting their interests in the lease of real estate or equipment.