Business Attorney Discuss Bridge Financing

Arizona Business Financing Strategies

Bridge financing is a short term financing option available for personal or business uses.  Individuals use this service to bridge the time period between buying a new house and selling their prior one.  A business with equity financing expected to close in a short time can also use a bridge loan to secure working capital until the funding goes through.

Personal Uses for Bridge Financing

             A bridge loan is a short-term interim loan used until permanent financing is secured.   A common use for bridge financing occurs with the purchase of a house. Many people worry that they need to have the closing date of their new home purchase occur after the sale of their current home.  This gap in time may cause you to miss out on your new home.  Bridge financing allows you to continue with your purchase by obtaining short-term financial assistance without needing to close on the sale of your previous home.  The bridge financing is used to close on the new home and the funds from the sale of your previous home are used to pay off the short-term financing.  This financing helps you “bridge” the time between your purchase and your sale. 

            It may be difficult to financially qualify for two mortgages on two properties at the same time.   A lender can use different criteria to qualify you for bridge financing.  With assistance from the Arizona business attorneys at Gunderson Denton & Peterson, the terms are negotiated for financing and payment of the bridge loan.  This will allow you to enjoy your new home without the worries of losing it to another purchaser while waiting for your home to sell.  

Business Uses for Bridge Financing

 
Get immediate cash flow to keep your business growing.

             Bridge financing can be recommended by an Arizona Business Attorney

used in business to provide debt financing or short-term cash flow before a company conducts an initial public offering or receives other sources of private equity financing.  If you want to take your business public but need additional immediate funds to accomplish this, bridge financing through the company’s initial public offering can be made.  An investor (a bank or individual) provides the cash in return for a discounted price on the initial public offering.  This could make the difference between going public or not.

            Bridge financing can also be helpful for a new business.  This financing can inject small amounts of cash to carry a company so that it does not run out of funds between private equity financing.  This influx in cash can help your business continue to run or grow until other financing opportunities are available. 

             With all financing options come questions and a need for guidance.  The attorneys Gunderson Denton & Peterson can provide the direction, services, and advice necessary to execute bridge and many other financing options that you or your business may need.

Arizona Attorney Discusses The Duty of Directors and Officers

The Duty of Directors and Officers Regarding Corporate Opportunities

When can a corporate officer take a corporate opportunity for his own benefit?

People who become corporate officers or directors assume important legal duties to the shareholders of the corporation.  One specific duty that an officer or director owes to shareholders is not to personally take corporate or business opportunities that could otherwise benefit the corporation.  

For example, assume that you are the CEO of a corporation that sells glass windows and you find a new glass provider that is cheaper than the one the corporation currently uses.  If you use the new glass provider for your own personal gain, you are taking the corporate opportunity.  If the corporation sues, you could be liable to the corporation for any damages that resulted from you taking the opportunity. 

To determine if a corporate officer or director has breached his or her duty toward shareholders by taking advantage of a corporate opportunity, some of the questions the court or the corporate counsel And corporate Law Attorneys in Arizona may ask are:

1. Was this opportunity within the corporation’s line of business?
2. Is it reasonably expected that the business would be interested in the opportunity?
3. Could the corporation have afforded it?
4. Would the corporation have taken advantage of the opportunity?

It is possible for a director or officer to take personal advantage of a corporate opportunity—if it’s done properly.  The officer or director must disclose the opportunity to the corporation, and the corporation decided not to pursue it.  It is important that the disclosure was full and fair.  In short, the director or officer has to give the corporation a fair chance to take advantage of the opportunity.

Directors and officers in this type of situation can face personal liability if they do not follow the law carefully.  A knowledgeable business attorney can explain whether a particular situation counts as a corporate opportunity, and how the director or officer should proceed if he or she wants to take personal advantage of such an opportunity.  A business attorney, such as the ones at Gunderson, Denton & Peterson, PC can also advise a corporation if one of its directors or officers has improperly taken a corporate opportunity.

Why do I need a Buy/Sell Agreement?

Attorney in Arizona advises on business buy sell agreements

Owning your own business can be tricky.  When partners are involved, it can become even more complicated, especially if something were to happen to one of them. An Arizona Corporate Law Attorney can be essential in setting up a corporation that adequately protects you.

A Buy/Sell Agreement is an agreement between the owners of a business that details what is to occur if there are significant changes in the life of a business partner.  Divorce, personal bankruptcy and death are only a few of the changes that can adversely impact a business partnership.  However, with a properly constructed Buy/Sell agreement, the headache of dealing with these changes can be minimized and your business can continue to thrive.

For example, you and a co-owner have been in business for years.  If your partner were to die prematurely, his widow might want to continue to take the same money out of the business that her husband had received when he was living.  If the widow is left in a difficult financial situation, she may force a sale of her inherited portion of the business in order to make ends meet, derailing your plans.  Situations such as this can be avoided by executing a Buy/Sell agreement with an Arizona Attorney.  The agreement sets forth the purchase price to be paid for the deceased partner’s part of the business, or it provides a formula for determining the price.  The agreement can have a mechanism for providing the funds needed to make the purchase.  The agreement can call for a life insurance policy to be purchased, and upon the death of a partner, the money received can be used to buy the widow’s portion of the business.   This allows you to continue your work while at the same time providing for the widow’s interests.

Because Arizona is a community property state, a partner’s divorce can lead to the division of your business between your partner and his ex-wife.  In community property states, all earnings during marriage and all property acquired with those earnings are considered community property, owned equally by husband and wife. When property is divided during a divorce, each spouse can claim a right to all community property. To avoid this prospect, a good Buy/Sell agreement may require the ex-wife of a divorced partner to sell any interest received in a divorce settlement back to the company, according to a valuation method provided in the agreement.  Our firm was recently involved in a case where a well-drafted Buy/Sell agreement prevented an ex-spouse from causing such problems, and even required the ex-spouse to accept a discounted value, paid over time, for her share of the business.

A business partner’s personal bankruptcy can throw an unexpected wrench into your company’s plans.  In some scenarios, a bankruptcy trustee can liquidate the assets of your business and take your partner’s share to satisfy his personal debts.  Even though the business is managed properly, your partner’s debts could ruin all the progress you’ve made in your business.  A well-drafted Buy/Sell agreement can ensure this doesn’t happen to you.  The agreement could require that your partner notify you of his filing for bankruptcy immediately, and give you the right to buy his portion of the business

For most companies, providing large lump cash payments to a divorced or bankrupt partner is not feasible.  In the Buy/Sell agreement, terms can be established to alleviate any cash flow worries.  An agreement can provide for a down payment followed by installments over a certain number of years with a reasonable interest rate.

The Arizona business attorneys at Gunderson Denton & Peterson, PC are experienced and available to assist in constructing Buy/Sell agreements.  Rely on their experience to help you avoid any unforeseen and potentially harmful changes to your business by creating a Buy/Sell agreement.