Rishi - I believe you would have to repay it before applying for the loan - which would create the risk of not being approved.
ami kassar
CEO Multifunding LLC and author of The Growth Dilemma
Is there any reason I can't prepay the Lender's debt BEFORE taking the MSLP?
There is a clause in the MSLP priority facility that a Eligible Lender may not refinance their own debt from the borrower (the exact wording is: However, the Eligible Borrower may, at the time of origination of the Eligible Loan, refinance existing debt owed by the Eligible Borrower to a lender THAT IS NOT the Eligible Lender.)
There is also a clause that says the Borrower will refrain from repaying any debt unless it's mandatory and due.
Is there any reason I can't prepay the Lender's debt BEFORE taking the MSLP? The reason I ask is that it would free up the Lender's book completely and give them positive cash-flow at no expense to me (because I can get the money back from MSLP, it's the equivalent of refinancing the loan!). This makes the transaction more advantageous and less risky.
Is there any reason I can't prepay the Lender's debt BEFORE taking the MSLP?
There is a clause in the MSLP priority facility that a Eligible Lender may not refinance their own debt from the borrower (the exact wording is: However, the Eligible Borrower may, at the time of origination of the Eligible Loan, refinance existing debt owed by the Eligible Borrower to a lender THAT IS NOT the Eligible Lender.)
There is also a clause that says the Borrower will refrain from repaying any debt unless it's mandatory and due.
Is there any reason I can't prepay the Lender's debt BEFORE taking the MSLP? The reason I ask is that it would free up the Lender's book completely and give them positive cash-flow at no expense to me (because I can get the money back from MSLP, it's the equivalent of refinancing the loan!). This makes the transaction more advantageous and less risky.
Where am I?
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I'm agree with Ami and would expand on his comment about "risk of not being approved". Take the conversation to your MSLP lender and propose the offer to payoff the debt prior to loan approval. Your desire to minimize their risk is great, you just want to make sure their underwriting team agrees with you.
