Credit Agreement Bank Definition

Contract contract ownership agreement, which is used in some states under which a buyer acquires real estate from a seller over a specified period, usually in regular installments. The title will not be sent to the buyer until after the last payment. Also known as article of the agreement. Lockbox (1) A cash management agreement that aims to reduce delays in depositing funds into the recipient`s bank accounts. A mailbox set up by a bank to receive cheques for its cash management clients. Lockboxes are used to speed up deposits with the bank by eliminating internal processing by the payment agency. The bank does not need to manage a separate mailbox for each Lockbox customer. Instead, e-mail messages that are received in a common field can be sorted. 2. Any loan that allows the borrower to borrow funds within a certain limit, repay at any time and receive any additional payments, provided the maximum amount is not exceeded. Sometimes called revolving credit line.

The distinguishing feature of a line of credit is that it recovers, which means that the amount borrowed can be repaid and repaid or re-advanced if the borrower`s needs change. Businesses or financial alliances govern the borrower`s financial situation and health. They define certain parameters in which the borrower must operate. The borrower`s auditors should be asked to view their contents as soon as possible. The dates on which these companies are subject to review should be subject to scrutiny, as should the separate financial definitions applicable. Financial commitments are a key element of any facility agreement and are probably the most likely to cause a default event if they are breached. Stronger borrowers can negotiate a right to resolve violations of financial pacts, for example by investing more money in the business. This is called the equity cure. 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.

Some of the most important definitions in each facility agreement are: – Franchise liquidity riskThe risk arising from a bank`s implied obligation to continue to make new loans or other cash flows related to the activities in order to preserve its commercial franchise, even if it may have financing difficulties. One of two types of liquidity uncertainty risk. Option risk is also referred to as a liquidity rate option risk. See liquidity risk and liquidity option risk. Sarah borrows $45,000 from her local bank. It accepts a 60-month loan at an interest rate of 5.27%. The credit contract stipulates that on the 15th of each month, she must pay $855 for the next five years. The credit agreement stipulates that Sarah will pay $6,287 in interest over the life of her loan, and it also lists all other loan-related expenses (as well as the consequences of a breach of the credit contract by the borrower).