CLFP Documentation Practice Exam

Why do lenders include a change of control clause in loan or lease documents?

To protect against ownership changes that could affect risk, control, or the lender's ability to enforce its security. To increase interest rates automatically. To simplify documentation. To authorize the borrower to assign the loan.

Correct Answer:

To protect against ownership changes that could affect risk, control, or the lender's ability to enforce its security.

Explanation:

A change of control clause is included to protect the lender when who owns or controls the borrower changes. If control passes to new owners or a different group, the risk profile, governance, and ability to repay or to enforce the loan’s security can shift in ways the lender didn’t approve. The clause gives the lender options—such as requiring consent, accelerating repayment, or terminating the agreement—if a change of control occurs, preserving the lender’s protection and control over the loan or lease relationship. It’s about risk management and maintaining enforceable security, not about automatically raising rates, simplifying paperwork, or letting the borrower assign the loan.

Access more questions from this quiz

Continue to CLFP Documentation Practice Exam for more practice questions and the full quiz experience.

Access More Questions