Dollar Bank - Business Center - Legal Fees

Legal Fees for Loan Documentation

A potentially irritating aspect of the loan documentation process comes at the end, when the legal fees have to be paid, since the typical arrangement is that the borrower must pay the legal bill for both its counsel and the bank's counsel. For a standard, uncomplicated term loan, the bank's legal bill alone may run from $2,000 to $10,000, and could be much higher for larger and more complicated loans.

Lending officers also find legal fees to be problematic, since frequently they must stand in the middle between the borrower and counsel for the bank regarding the fairness of the billing. Use of standard loan documents simplifies the loan documentation process and can reduce legal fees. Such documents are most frequently used for smaller, uncomplicated "cookie cutter" transactions. Banks with legal staffs sometimes modify standard documentation internally or prepare non-standard documents at a somewhat reduced cost, but this alternative is not always available, depending on the size of the legal staff and its workload.

If you find yourself in the position of paying for your bank's legal fees when negotiating and documenting a loan agreement, here are some tips for keeping your legal bill to a minimum:

1. Learn to read and understand your loan documents. There are courses available on loan documentation sponsored by the American Institute of Banking.
   
   
2. Discuss the loan agreement with your counsel and then negotiate any of the disputed elements yourself, directly with your banker.
   
   
3. Try to keep your lawyer and the bank's lawyer from talking to each other without your permission or being present.
   
   
4. If your bank uses more than one law firm to document its loans, ask your lending officer for competing quotes on documentation costs.
   
   
5. Ask your bank to give you a range into which you can expect your legal fees to fall. Ask for periodic updates on the amount of legal fees incurred to date with a complete accounting of the time spent.
   
   
6. Ask your lending officer to use standard documents when possible.
   
   
7. When talking with any lawyer, make sure you are aware of the clock, keeping small talk to a minimum. Meet with the lawyers at their offices so that you cut down on their travel time.
   
   

Our experience has been that a good drafting of loan documentation can be important to both the borrower and the lender. Following the tips noted above, however, will help to keep your legal bill to a minimum.