Facility Agreement Requirements

Facility Agreement Requirements: What You Need to Know

A facility agreement is essentially a legal contract that governs the terms and conditions of a borrower`s usage of a lender`s facility. This can include a line of credit, a term loan, or other forms of financing. The agreement outlines the borrower`s obligations, such as repayment terms and interest rates, as well as the lender`s rights, such as the ability to impose fees or take collateral in the event of a default.

When it comes to securing a facility agreement, there are several requirements that you should be aware of. This article will discuss some of the most important ones that you should keep in mind.

1. Financial Statements

One of the key requirements for a facility agreement is providing the lender with financial statements. These statements should be prepared by a certified accountant and should include income statements, balance sheets, and cash flow statements. The lender will use these statements to assess your creditworthiness and determine whether you are a good candidate for financing.

2. Collateral

Another important requirement for a facility agreement is collateral. Collateral is essentially any asset that the lender can take possession of in the event that the borrower defaults on the loan. This can include real estate, equipment, inventory, or any other valuable assets. The lender will typically require that you provide collateral that is worth at least as much as the loan amount.

3. Personal Guarantees

In addition to collateral, the lender may also require a personal guarantee from the borrower. A personal guarantee is essentially a promise that the borrower will repay the loan even if their business fails. This guarantee is typically provided by the owner or owners of the business.

4. Legal Documentation

To secure a facility agreement, you will need to provide legal documentation that outlines the terms and conditions of the agreement. This may include loan agreements, security agreements, and other legal documents that outline the rights and obligations of both parties.

5. Insurance Policies

Finally, the lender may require that the borrower provide proof of insurance. This can include property insurance, liability insurance, and other forms of insurance that protect the lender`s investment in the event of a disaster or other unforeseen event.

Overall, securing a facility agreement can be a complex process that requires careful consideration of a variety of factors. By being aware of these requirements and working with a qualified lender, you can ensure that you are able to secure the financing you need to grow your business and achieve your goals.