Overdraft services provide credit to a business when the company`s cash account is empty. The lender calculates interest and fees on borrowed money. Overdraft services cost less than credits, are quickly concluded and do not include penalties for prepayment. A temporary loan is a commercial loan with a fixed interest rate and maturity date. A company typically uses the money to finance a major investment or acquisition. Medium-term loans are less than three years old and are repaid monthly, possibly with balloon payments. Long-term loans can be up to 20 years old and guaranteed by guarantees. This section contains the insurance and guarantees, commitments and delays that apply to each facility. It will also contain provisions that protect the bank from any change in circumstances that may affect its lending activities. Particular attention should be paid to all “default cross” clauses that affect the fact that a failure in one agreement triggers a standard between another. These should not apply to on-demand facilities provided by the lender and should include thresholds defined accordingly. There are many definitions in each facility agreement, but most are either standard – and generally uncontested – or specifically for individual transactions.
They should be carefully considered and, if necessary, carefully considered using the lender`s offer letter/offer sheet. Any positive commitment that the lender`s facility will always prevail over the borrower`s other debts may be rejected, as this is not always under the borrower`s control. A negative agreement that the borrower does not take steps to influence the order of priority of the facility may be an acceptable alternative. Some of the most important definitions that appear in any agreement are: For example, if a jewelry store has little money in December, when sales have fallen, the owner can request an investment worth $2 million from a bank that will be repaid in full by July, when the business is in progress. The jeweler uses the funds to continue operating and repays the loan in monthly installments until the agreed date. For more information on the Cannais provisions of facilitated contracts, visit the Loan Markets Association or the Association of Corporate Treasure. Borrowers: The definition of the borrower includes all group companies that require access to the loan, including revolving credits (flexible credits as opposed to a fixed amount repaid in increments) or the working capital component. This should also include all target companies acquired with the funds made available. Subsidiaries that need a provision may need to join the group of borrowers.
If there is a reason why the affected companies cannot be parties to the agreement when they are executed – for example. B in the event of an acquisition by limited companies – prior approval from the bank would be required for them to be included in the agreement at a later date. If there are foreign companies in the group, it is worth asking whether they will have access to credit facilities or how. The facility agreement may also designate an individual borrower and allow that borrower to continue lending to other members of his or her group of companies. A loan contract is the document in which a lender – usually a bank or other financial institution – sets out the conditions under which it is willing to provide a loan to a borrower. Loan contracts are often referred to by their more technical name, “easy agreements” – a loan is a bank “facility” that the lender offers to its client. This guide focuses on the most common conditions of an easy agreement.