Did you read your loan agreement properly?

Most directors sign a loan agreement, see the money land, and think job done.

But buried in the small print there’s often a clause saying you can’t take on significant extra borrowing without the lender’s permission. Ignore that, and you may have just triggered a breach.

Sounds boring. It isn’t.

Once a lender decides you’ve gone outside the agreement, they’ve got options. They can freeze things, no more drawdowns, no more flexibility. They can tighten the terms, extra reporting, a waiver fee, more security. Or, worst case, they can reprice, demand repayment, or move to enforce.

That doesn’t always happen. But it happens enough that it should worry you, and here’s what’s changed. Lenders now use AI and automated monitoring. Covenant issues that might once have sat unnoticed for months can get picked up in days. Sometimes hours.

Here’s the uncomfortable truth. Most directors never read the paperwork properly. They trust the headline rate and assume the rest is standard. But the real risk is rarely the interest rate. It’s the restrictions sitting quietly underneath it.

I’ve seen this exact clause catch directors out, and it’s one of the reasons I wrote a book called Before The Wave. No sensible captain leaves port without a lifeboat, and this is the kind of thing that lifeboat is built for, the traps you don’t spot until you’re already in one.

A good broker spots these clauses before you sign, not after you’ve broken one. Because the right deal isn’t just about the money today. It’s about not creating a problem tomorrow.

I’m Mark Smillie. See you tomorrow.