A large number of business owners who seek financing under the SBA 7(a) Loan Program operate from leased locations, be it stand-alone buildings, shopping centers or commercial office parks. In these transactions, underwritten on a cash-flow basis, the collateral typically consists of tangible, business personal property located on leased premises such as equipment, furniture, trade fixtures[1] and inventory. In order to facilitate the liquidation of collateral in these type of loans, the SBA requires lenders to obtain an agreement from landlords, and sub-landlords, giving the lender access to the leased premises. But, should this agreement for access provide for a waiver or a subordination of the landlord’s interest in the collateral? The answer is not clear. Waiver v. Subordination Part of the challenge comes from the terminology used by the SBA and the use of the terms “waiver” and “subordination” interchangeably. For example, for 7(a) loans, the SOP defines a Landlord Waiver as one where the landlord “gives the Lender access to the leased premises and facilitates the liquidation of the collateral on the borrower’s premises[.]” SOP 50 10 5 (J), with technical corrections, page 193. No further guidance is provided. On the other hand, the Landlord Waiver provision in … Continue reading Best Practices: Landlord’s Agreements – Waiver or Subordination?