What other factors might exist that could delay closing on a new financing commitment?
Lenders will likely change their focus to the amount and types of due diligence requested from a borrower in connection with a new financing commitment. To avoid delay in closing a new financing arrangement, borrowers should proactively assemble and provide lenders with information and supporting documentation in response to anticipated concerns surrounding the adverse effects of COVID-19 on their business. The following are examples of some of the additional questions and due diligence to consider:
- Whether the borrower operates or conducts business with counterparties in communities affected by COVID-19.
- Assessment of the borrower’s losses attributed to COVID-19 to date and projected losses that may arise.
- The ability of the borrower and the borrower’s counterparties to perform under existing contracts and the ability for one or both parties to suspend or terminate such obligations and any such negotiations that might be underway with respect to suspension or termination by either party.
- The ability of the borrower to collect accounts receivable and pay accounts payable.
- The adequacy of the borrower’s supply chain and inventory (and whether there are any alternative supply chains available).
- Whether the borrower is part of a regulated industry that is or might be subject to new regulations and restrictions, and if so, whether the business is in compliance with such new regulations and restrictions and has adopted a policy or procedure for monitoring and implementing the ongoing modifications and updates to such regulations and restrictions.
- The existence and modification of any business continuity, disaster recovery and response policies, cybersecurity policies and procedures, and other crisis management procedures.
- The existence and viability of a succession plan with respect to key principals and managerial officials.
- The existence and scope of any business interruption or other applicable insurance.
- The applicability of any required third-party or governmental approvals that may be necessary to close the transaction and the potential delay in obtaining such approvals.
Last updated March 16
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