Interim Loan Agreement Template for United Arab Emirates

A UAE-governed interim loan agreement is a temporary financing arrangement that provides short-term funding to bridge a gap until more permanent financing is secured or a specific event occurs. The agreement is structured in compliance with UAE Federal Laws, including the UAE Civil Code and Commercial Code, and must adhere to UAE Central Bank regulations regarding interest rates, security arrangements, and banking practices. It includes detailed provisions for drawdown, repayment, security, and events of default, while considering both conventional and Islamic finance principles where applicable.

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What is a Interim Loan Agreement?

The Interim Loan Agreement is a crucial financing instrument in the UAE banking sector, designed to provide temporary funding solutions while permanent financing arrangements are being finalized. This document type is commonly used in situations requiring immediate funding for time-sensitive opportunities, corporate acquisitions, project initialization, or working capital needs. The agreement must comply with UAE Federal Law No. 5 of 1985 (Civil Code), UAE Federal Law No. 18 of 1993 (Commercial Code), and UAE Central Bank regulations. It typically includes comprehensive provisions for facility terms, security arrangements, drawdown mechanics, repayment obligations, and events of default. The interim nature of the facility is reflected in its shorter tenure and often higher pricing compared to permanent financing solutions. Islamic finance principles may need to be incorporated depending on the parties involved.

What sections should be included in a Interim Loan Agreement?

1. Parties: Identification of the lender(s) and borrower(s), including their full legal names, registration details, and addresses

2. Background: Context of the interim loan, purpose, and relationship to any permanent financing arrangement

3. Definitions and Interpretation: Key terms used in the agreement, including financial definitions, calculation methods, and interpretation rules

4. The Facility: Details of the interim loan facility, including amount, purpose, and availability period

5. Conditions Precedent: Conditions that must be satisfied before the facility becomes available

6. Drawdown: Procedures and requirements for drawing down the loan

7. Interest: Interest rate, calculation methods, payment dates, and default interest provisions

8. Repayment: Terms of repayment, including scheduled payments and final maturity

9. Prepayment: Provisions for early repayment, including any penalties or notices required

10. Representations and Warranties: Standard and transaction-specific representations by the borrower

11. Covenants: Positive and negative undertakings of the borrower

12. Events of Default: Circumstances constituting default and consequences

13. Security: Details of any security arrangements securing the facility

14. Changes to Parties: Assignment and transfer provisions

15. Administration: Administrative provisions including notices and calculations

16. Governing Law and Jurisdiction: UAE law as governing law and jurisdiction provisions

What sections are optional to include in a Interim Loan Agreement?

1. Islamic Finance Provisions: Required if the facility needs to be Sharia-compliant

2. Permanent Financing Arrangements: Required if the interim loan is bridge financing to a specific permanent facility

3. Security Trustee Provisions: Required if multiple lenders are involved and security is held by a trustee

4. Intercreditor Provisions: Required if there are multiple creditors with different priorities

5. Currency Provisions: Required if the facility involves multiple currencies

6. Tax Provisions: Detailed tax provisions required if cross-border elements exist

7. Cost Protection: Additional provisions protecting lender against regulatory changes

8. Agency Provisions: Required if facility involves multiple lenders with an agent

What schedules should be included in a Interim Loan Agreement?

1. Schedule 1 - Conditions Precedent: Detailed list of required documents and conditions

2. Schedule 2 - Form of Drawdown Request: Template for borrower to request loan disbursement

3. Schedule 3 - Repayment Schedule: Detailed payment schedule if applicable

4. Schedule 4 - Form of Compliance Certificate: Template for periodic compliance certification

5. Schedule 5 - Security Documents: List and copies of security documentation

6. Schedule 6 - Permitted Security: List of security interests permitted under the agreement

7. Schedule 7 - Form of Transfer Certificate: Template for transferring loan participations

8. Appendix A - Calculation of Interest: Detailed methodology for interest calculations

9. Appendix B - Forms of Notices: Standard form notices for various communications

Authors

Alex Denne

Head of Growth (Open Source Law) @ Genie AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents

Publisher

Genie AI

Document Type

Financing Agreement

Cost

Free to use

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