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experiences, the General Partners expect that
the lender will require the partnership to obtain
a financial guarantee bond from an insurance
company acceptable to the lender. The insurance
company will then, as surety, obligate itself to
pay the lender should any of the Limited Partners
default in making payments under the provisions
of their respective promissory notes.
* * * * * * *
Institutional Financing. Immediately after the
formation of the partnership, the partnership
intends to use the partnership property and the
promissory notes given by the Limited Partners as
part of their capital contribution as security
for a loan. Since the loan proceeds are
necessary in order to obtain the partnership
property, a simultaneous closing of the
institutional loan and the acquisition of the
partnership property will probably have to be
arranged. The partnership expects to borrow
Five Hundred Thirteen Thousand and No/100
Dollars ($513,000) and expects to pay three (3)
percentage points in order to obtain the loan.
In addition, the partnership objects [expects]
the institutional lender to require the issuance
of a financial guarantee bond prior to the
issuance of the loan. Certain expenses are
projected in obtaining the financial guarantee
bond. Based upon the General Partners’ prior
experience in obtaining financial guarantee
bonds, the partnership expects to pay two (2)
percentage points per year for the financial
guarantee bonds and plans to incur some
significant legal expenses in obtaining the
bond commitment. As set forth in the “Use of
Proceeds” section, Forty-Two Thousand and No/100
Dollars ($42,000.00) has been budgeted for this
expense.
The Dakotah Hills partnership agreement also describes the
partnership’s intent on this point as follows:
Use of Promissory Notes. Immediately upon the
formation of the partnership, the partnership
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