I'm working as a fractional CFO (set up as an LLC) and one of my clients is looking to secure a Line of Credit.
I'm NOT a registered/licensed broker-dealer and require legal advice on what services I can provide without breaching any laws and regulations. I am based in California, so this needs to be taken into account as well.
Here's what I would like to do:
- support client in putting together and optimizing lender documentation package (financial reports, returns, etc.)
- analyze LOC terms / term sheets and advice client on whether terms are good / bad, as well as where he can push back
- advice client on borrowing strategy (how much should we borrow, what is the impact on forward-looking financials)
- advice client on communication strategy with lender during negotiation phase
Here's what I know I CAN'T do:
- charge a success based fee for my work on this
- act as middleman between lender and client and negotiate on behalf of client
In the context of this, can I please get your advice on what activities I can and can't perform?
If I'm happy with your initial response, I'd require further support with drafting the engagement letter for this (additional payment).
One additional point where I need your advice is the engagement structure. I'm looking to do the following:
- we're currently gathering the initial document package
- I'm supporting client by reviewing package and providing notes
- Two options once the package is submitted:
--- a) Lender says "ok, we'll continue the process" and I'll charge my client a flat fee of $3,000 for the full LOC process. This will not be contingent on successful closing.
--- b) Lender says "sorry, but this will be a no-go" and I'll only charge my client $500 to compensate for my time reviewing documents.
The idea behind this is to reduce my client's risk/exposure a little bit in case there is an immediate "no". My only concern is that this could be construed as an indirect success-based arrangement? (Although nothing is contingent on ultimate successful closing)
Please provide your advice on this point, too.
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