Facility agreement is a contractual agreement between a borrower and a lender that outlines the terms and conditions of a loan facility. It is a legal document that regulates the relationship between the borrower and the lender and establishes the rules that must be adhered to by both parties.
A facility agreement is typically used in situations where a borrower requires a significant amount of capital to finance a particular venture or project, such as a real estate development, business expansion, or refinancing of an existing debt. In such cases, the borrower may approach a lender, such as a bank, to secure a loan facility.
The facility agreement outlines the terms of the loan, including the amount of the loan, the repayment schedule, interest rates, collateral requirements, and other covenants that the borrower must comply with. The document also outlines the penalties that may be imposed if the borrower fails to meet the terms of the agreement.
One of the key features of a facility agreement is the security that the borrower provides to the lender. The security can take different forms, such as real estate, personal guarantees, or cash collateral. The lender will assess the borrower`s creditworthiness and evaluate the security to determine the risk involved and the interest rate to be charged.
The facility agreement is a legal document that is enforceable in court, and it provides protection to both parties. It is important that both parties seek legal advice and carefully review the terms of the agreement before signing it.
In conclusion, a facility agreement is a legal document that outlines the terms and conditions of a loan facility between a borrower and a lender. It sets out the terms of the loan, the repayment schedule, interest rates, collateral requirements, and other covenants that the borrower must abide by. This agreement is crucial in securing financing for a business venture or project and provides protection to both parties involved.