Lenders fully announce all the terms of the loan in a credit agreement. The important credit terms included in the credit agreement include the annual interest rate, the application of interest on outstanding balances, all account-related fees, the duration of the loan, payment terms and possible consequences for late payments. This provision defines different terms that are used in the agreement to ensure that all parties get on the same page. As a general rule, there are “standard” trading points that are advanced by borrowers, for example. B a standard definition of major adverse amendments/effects generally refers to the effect that may affect the debtor`s ability to meet his obligations under the facility contract. The borrower may attempt to limit this obligation to his own obligations (and not to other obligations), the borrower`s payment obligations and (sometimes) his financial obligations. While the financial institution usually prepares the first draft agreement, it is the subject of negotiations. A potential borrower should have a clear overview of what they want from the credit facility. Read on to learn more about different types of credit agreement facilities and general provisions.
While not all facility agreements require that borrowed money be used for specific purposes, most do. Lenders prefer to indicate the purpose of the credit to ensure that it is associated with the lender`s credit analysis. There will also be delay provisions for breaches of the convention itself. They may grant time for remedial action on the part of a borrower and, in any event, apply only to substantial infringements or violations of the main provisions of the agreement. The provision for non-payment usually includes additional time to cover administrative or technical difficulties. Insolvency defaults should also provide reasonable time frames and include appropriate waivers for solvent restructurings, with the lender`s agreement. A borrower should also always seek a “tax credit,” so the lender, if receiving a tax credit for all payments made, should be required to repay the loan amount to the borrower. Credit contracts also cover other types of credit. These include credit purchase contracts, lease-to-sale contracts and conditional sales contracts.