ILA certificate for a commercial loan: who needs one and how to get it fast

Who needs an ILA certificate on a commercial loan

Lenders ask for independent legal advice from anyone taking on personal risk for a loan that benefits someone else. On commercial lending that usually means:

• Directors and shareholders giving a personal guarantee
• Spouses, partners or family guaranteeing the loan or charging a home they own
• Owners of a property used as security for someone else’s loan, under a third-party legal charge
• People living in a property being charged, who sign an occupier’s consent
• Lenders to the company agreeing to rank behind the new lender, under a deed of subordination or postponement

The lender’s facility letter or its solicitors’ instructions list who must be advised.

Why lenders insist on it

After Royal Bank of Scotland v Etridge, a lender that takes a guarantee or charge from someone whose relationship with the borrower is non-commercial has to take steps to make sure they understood it and weren’t pressured. A solicitor’s certificate confirming the advice is how lenders show they’ve done that. Many apply it to all guarantors, including directors, as a matter of policy. Without the certificate, the funds won’t be released.

What makes it slow, and how to avoid it

• Wrong certificate wording. Each lender has its own form. Send the solicitor the lender’s template at the start.
• Missing documents. The solicitor needs the final versions: the guarantee or charge, and the facility letter or loan agreement it relates to.
• Drafts changing. If the guarantee is amended after the advice, the advice may need repeating.
• Guarantors seen together when the lender wants them seen separately. Check the lender’s instructions.
• ID not ready. Have photo ID and a recent proof of address to hand.

On a bridging loan, where completion dates are tight, book the advice as soon as the lender issues its documents. See the bridging loan ILA checklist.

Who can give the advice

The solicitor must be independent of the lender. Many lenders also want them independent of the company and the main borrower, so the advice focuses only on the guarantor’s own position. That usually rules out the company’s own solicitors. Check the lender’s instructions; we can check them with you on the free consultation.

What the solicitor goes through

• how much you could be asked to pay, and whether it’s capped
• which debts are covered, now and in future
• what’s at risk, including your home if you’re signing a charge
• whether the lender can change the loan without asking you
• that you’re signing freely, and what happens if you don’t sign

Once you’ve been advised, the solicitor signs the certificate and sends it, usually with the signed documents, to the lender or its solicitors.

How quickly can I get one?

If the documents and certificate template are ready, the video call and signed certificate can often be done the same day. See what an ILA certificate is and ILA for a director’s personal guarantee.