The loan agreement is the contract between the borrower and the lender arranging a reciprocal agreement made by each party. There are many types of loan agreements, including "facility agreements," "revolvers," "term loans," "working capital loans." The loan agreement is documented through the compilation of various reciprocal appointments made by the parties involved.
Prior to entering into a loan agreement, the "borrower" first makes a representation of his affairs regarding the character, creditworthiness, cash flow, and any guarantees he may have as collateral for the loan. These representations are considered and the creditor then determines under what conditions (terms), if any, they are ready to advance the money.
Loan agreements, like any contract, reflect "offer", "offer acceptance," "consideration," and can only involve "legal" situations (futures loan agreements involving the sale of heroin drugs are not "legal"). Loan agreements are documented through letters of their commitment, agreements that reflect understanding reached between the parties involved, promissory notes, and collateral agreements (such as mortgages or personal guarantees). Loan agreements offered by regulated banks differ from those offered by finance companies in which the bank receives the "banking charter" which is granted as a privilege and involves "public trust."
Loan agreements are usually in written form, but there is no legal reason why a loan agreement can not be a pure oral contract (although verbal agreements are more difficult to implement).
Video Loan agreement
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For commercial banks and large finance companies, "loan agreements" are typically not categorized although "loan portfolios" are often widely characterized as "private" and "commercial" loans while "commercial" categories are subdivided into "industry" and "commercial". real estate loans. "Industrial" loans are those that depend on the cash flow and creditworthiness of the company and the widgets or services it sells. Loans "commercial real estate" is a loan that pays back but it depends on the rental income paid by the tenant who leases space, usually for a long time. The category of loan portfolio categorization is more prevalent but it is always variations around larger themes.
Loan agreements originating from commercial banks, savings banks, finance companies, insurance organizations, and investment banks are very different from each other and all feed different destinations. "Commercial banks" and "savings banks," as they receive deposits and benefits from FDIC insurance, generate loans that incorporate the concept of "public trust." Prior to interstate banking, "public trust" is readily measured by state bank regulators who can see how local deposits are used to fund the working capital needs of local industries and businesses, and the benefits associated with the work of the organization. The "Insurance" organization, which collects premiums to provide life or property/casualty protection, creates their own type of loan agreement. Credit agreements and documentation of "Bank" and "Insurance" organizations evolve from their respective cultures and are governed by policies that somehow deal with any organizational obligations (In the case of "banks," the liquidity needs of their depositors; in the case of insurance organizations, the need for liquidity related to their expected "claim" payment).
"Investment banks" make loan agreements that meet the needs of investors whose funds they seek to attract; "Investors" are always sophisticated and accredited organizations are not subject to bank regulatory oversight and the need to fulfill public trust. Investment banking activities are overseen by the SEC and the primary focus is on whether correct or proper disclosure is made to the party providing the funds.
Type of Loan:
- bilateral loans
- syndication loan
Categorizing loan agreements by type of facility, usually yield two main categories:
- term loan, which is paid on a certain installment over that time period, or
- revolving loan (or overdraft) where up to the maximum amount can be withdrawn at any time, and interest is paid monthly to month on the amount withdrawn.
However, in these two categories, there are various subdivisions such as interest loans only, and balloon payment loans. It is also possible to categorize whether the loan is a secured loan or an unsecured loan, and whether the interest rate is fixed or floating.
Maps Loan agreement
Loan Agreement
Loan agreement forms vary widely from industry to industry, from one country to another, but characteristically a professionally designed loan agreement will incorporate the following:
- Parties to contract with their address
- Definition or terms of interpretation
- Facilities and destinations
- The condition already exists before use
- Payment terms
- Payment terms and cancellations
- Interests and interests period
- Terms relating to losses associated with any deductions being charged
- Payment terms
- Statement from the borrower
- Statement from the lender
- Borrower agreement
- Default event
- Fixes in default
- Conditions for penalties and indemnification are liquidated
- For a syndicated loan, provisions relating to the facility agent and the security and voting agency of the lender
- The formula for calculation
- Provisions for lender fees
- Terms for cost
- Securitization conditions
- Terms of change and deletion
- Covenant related to party changes
- Set-off clause
- Separation Clause
- Clerical clause
- Address for notification
- Language requirements
- Choice of legal clause
- Forums selection clause
- Appointment of process agent
See also
- Debt
- Cleanup clause
- Cov-lite
Footnote
Source of the article : Wikipedia
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