Should you lend to a business with a track record of lawsuits?

Description

Abstract: Businesses may be subject to lawsuits for a multitude of reasons. While a lawsuit doesn’t, in and of itself, mean that the business or its leadership engaged in wrongdoing, it could affect the degree of inherent risk associated with any lending arrangements. This article suggests four steps lenders can take to evaluate the risk associated with pending lawsuits. The steps can help determine whether it makes sense to proceed with a prospective borrower’s application. A short sidebar discusses questions to ask about current and previous litigation to help understand the legal risk a prospective borrower faces.