- 1
Compensation, in writing, before anything is signed
How we are compensated on the transaction, and by whom, is set out in writing before the client enters into any agreement and before any lender is approached.
Why. A client cannot weigh advice without knowing what the adviser is paid for it. Disclosure at closing, or in a footer, is too late to matter.
- 2
The client sees everything before a lender does
The financing model, the lender presentation and the blind teaser are shown to the client, and approved by the client, before any of them reaches a lender.
Why. It is the client's company being described. Nothing should be said about it in the market that the client has not read first.
- 3
Nothing identifying without approval by name
Lenders that fit see a blind teaser under a codename. No identifying information about the client is sent to any lender without the client's specific approval of that lender, by name.
Why. A company's name in forty inboxes is a confidentiality problem it never agreed to, and it weakens the process it was meant to run.
- 4
Cost expressed annually
Every offer we put in front of a client is stated as an annual percentage rate, or as a spread over a named published index. A periodic rate may accompany that figure but never replaces it.
Why. Rate, fees and original issue discount only compare when they sit on the same annual basis. Quoting a period instead of a year is the easiest way to make expensive money look cheap.
- 5
The whole capital structure, shown
Every term sheet is set against the company's existing debt: where the new facility would sit in priority, what it costs each year, and what it does to leverage and coverage.
Why. A facility is only cheap or expensive against what it replaces and what sits beside it.
- 6
Declines reported back
The client is told how many lenders declined and the stated reasons, as counts: for example, 5 on size, 3 on sector, 1 on leverage. A lender is named only where the client approved it by name.
Why. It is the client's deal. Withholding the reasons keeps them dependent on the adviser and stops them fixing what is actually wrong.
- 7
Conflicts named when they arise
Any affiliate relationship, ownership interest or referral compensation connected with a transaction is disclosed to the client in writing when it arises, not in a footer and not afterwards.
Why. A referral to a related party is not improper. Concealing that it is a related party is.
A standard needs at least one signature to be more than a web page. Here is ours.
Adopted, all seven clauses, on every transaction we place.
Ask it of anyone
If you are raising capital, the seven clauses are a checklist. Ask whoever advises you which of them they will commit to in writing, and notice what happens.
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