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. Institutional credit contracts must be concluded and signed by all parties involved. In many cases, these credit contracts must also be submitted and approved to the Securities and Exchange Commission (SEC). 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.
Before lending money to someone or providing services without payment, it is important to know if you need a credit contract to protect yourself. You never really want to borrow money, goods or services without a credit contract, to make sure you`re reimbursed or that you can take legal action to get your money back. The purpose of a loan agreement is to describe in detail what is loaned and when the borrower must repay it and how. The loan agreement contains specific conditions that describe precisely what is given and what is expected in return. Once it has been executed, it is essentially a promise to pay by the lender to the borrower. Unsecured commercial loans generally require excellent financial stability, a good credit rating and a proven debt repayment balance sheet. Borrowers often have to meet higher requirements to obtain an unsecured loan. In addition, the interest rates on an unsecured loan are much higher, as the lender takes a much higher risk.
Parties, relationship and loan amount: both parties to the loan agreement are described at the beginning. They must be identified in one way or another, for example. B with an address, and their relationship should be defined.