Every now and again, a banker may encounter an unfamiliar legal entity. Even with more common entities such as corporations, partnerships, and individuals, the legal considerations may not be always top-of-mind for bankers. In this series, we'll address some of the essential legal considerations for various types of entities that participate in financing transactions.

In this video we discuss:

  • Why it's important to understand your borrower
  • The seven most common entities

I am Matthijs van Gaalen and I'm a corporate / commercial lending lawyer at Gowling WLG.

You are watching our first video as part of our video series entitled Different Types of Borrowing Entities video series.

Over the next couple of videos, we're going to introducing types of borrowing entities that bankers could encounter and their key features.

Understanding your borrower is important because it can impact:

  1. the level of internal authorization needed to approve the loan,
  2. the way in which the loan and security documents are
    1. structured,
    2. prepared and
    3. signed.
  3. extent of the liability on the credit parties

As such, the type of entity that is borrowing or guaranteeing a loan is incredibly important to ensure the lender is able to fully recover the loan from the assets in the event of a default.

Although there are many others, the seven most common types of entities you are likely to encounter are

  1. Corporation
  2. Sole Proprietor
  3. General Partnership
  4. Limited Partnership
  5. Trust
  6. Not for Profit / Charity
  7. Government Entity

Watching our series on Different Types of Borrowing Entities is going to be a high-level review of these types of entities. That will provide you with general familiarity with the types of entities that you are going to encounter. This knowledge will serve you well in discussions with prospective clients when you're structuring new arrangements or with existing clients when you're amending existing credit facilities.

Read the original article on GowlingWLG.com

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.