Representations and guarantees: these should be carefully considered in all transactions. It should be noted, however, that the purpose of insurance and guarantees in a facility agreement differs from its purpose in purchase and sale contracts. The lender will not attempt to sue the borrower for breach of representation and guarantee – instead, it will use an infringement as a mechanism to call a default event and/or ask for repayment of the loan. A disclosure letter is therefore not required with respect to insurance and guarantees in the facility agreements. Guaranteed loans are easier to obtain because of the guarantees provided. This will help the lender reduce the risk-taking of the loan. This also generally means that the interest rate for the loan will be lower. Representations and guarantees are similar in all facility agreements. They focus on the borrower`s legal capacity to enter into financing agreements and the nature of the borrower`s activity.
They will often be broad and the borrower may try to limit them to issues that, if not correct, would have a significant negative effect. This qualification may apply to a large number of insurance and guarantees relating to the borrower`s activities (for example. B litigation, environmental and accounting matters), but will probably not be acceptable to the lender in order to limit the borrower`s ability to enter into financing agreements or with respect to important financial information. A commercial loan agreement refers to an agreement between a borrower and a lender when the loan is intended for commercial purposes. Whenever a significant amount of money is borrowed, an individual or organization must enter into a loan agreement. The lender makes the money available provided that the borrower accepts all credit provisions, such as. B a pre-agreed interest rate and certain repayment dates. Each credit contract is a little different. For entrepreneurs, it is important to read and understand the terms before execution. It also provides independent legal advice, particularly for more complex credit contracts, such as commercial mortgages or bonds.