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Close Quicker with a Smaller Cap on Legal Fees

TheFunded.com Advice

Posted by Anonymous on 2008-09-07

Tags: Closing Strategy Lawyers

PUBLIC:

By diligently negotiating the cap on investor legal fees, you will dramatically accelerate both the diligence and the closing timeline. Most investors will easily agree to a cap of $25,000 to $50,000, and you can be sure that all of this money (and time) get chewed through on both sides. Factoring in your own legal costs, you could be looking at a $50,000 to $100,000 deal that takes between two and four months to close.

However, negotiate hard when you get a term sheet to cap the investor legal expenses at $10,000. With fees at this level, all of the work needs to go into drafting documents versus negotiating detailed terms. The lawyers themselves will feel pressure to close faster, rather than work endlessly to reach the agreed cap level. All in all, you will be looking at a cleaner deal that closes in two weeks to one month.

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