Inventory Financing Agreement Template for United Arab Emirates

A comprehensive financing agreement governed by UAE law that enables businesses to obtain funding using their inventory as collateral. The agreement details the terms and conditions under which a lender provides financing against the borrower's inventory, including security arrangements, management requirements, drawdown mechanics, and repayment terms. It incorporates specific provisions required under UAE commercial law and may include Sharia-compliant structures where necessary. The document addresses key aspects such as inventory valuation, monitoring requirements, reporting obligations, and enforcement rights while ensuring compliance with UAE regulatory requirements.

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What is a Inventory Financing Agreement?

The Inventory Financing Agreement is a specialized financing document used when businesses require working capital funding secured against their inventory. This agreement is particularly relevant in the UAE market where businesses often maintain substantial inventory levels due to their role as a regional trading hub. The document is structured to comply with UAE Federal Laws, including the Commercial Code and Civil Code, and may incorporate Sharia-compliant principles when required. The agreement typically includes detailed provisions for inventory management, valuation methodologies, security arrangements, and enforcement mechanisms. It is commonly used by trading companies, manufacturers, and distributors operating in the UAE who need to optimize their working capital while maintaining significant inventory levels. The document must address specific UAE regulatory requirements regarding security interests over movable assets and should consider the local business environment and practices.

What sections should be included in a Inventory Financing Agreement?

1. Parties: Identifies and defines the Lender, Borrower, and any guarantors or security providers

2. Background: Sets out the context of the financing arrangement and the purpose of the facility

3. Definitions and Interpretation: Defines key terms and establishes interpretation principles for the agreement

4. The Facility: Details the nature, amount, and purpose of the financing facility

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

6. Security: Describes the security interest over the inventory and any additional collateral

7. Representations and Warranties: Sets out the Borrower's declarations regarding their business, inventory, and capacity

8. Covenants: Details positive and negative obligations of the Borrower during the facility period

9. Inventory Management: Specifies requirements for maintaining, storing, and managing the financed inventory

10. Drawdown Mechanics: Procedures and conditions for requesting and receiving financing

11. Repayment Terms: Specifies payment obligations, including principal, profit/interest, and payment schedule

12. Events of Default: Lists circumstances constituting default and corresponding remedies

13. Security Enforcement: Describes the Lender's rights and procedures for enforcing security upon default

14. Boilerplate Provisions: Standard legal provisions including notices, amendments, governing law, and jurisdiction

What sections are optional to include in a Inventory Financing Agreement?

1. Islamic Finance Provisions: Required if the facility needs to be Sharia-compliant, including specific structuring and profit calculation methods

2. Guarantees: Include when third-party guarantees are part of the security package

3. Insurance: Detailed insurance requirements when specific insurance coverage is required beyond standard provisions

4. Security Agent Provisions: Required in syndicated facilities where a security agent holds the security on behalf of multiple lenders

5. Regulatory Compliance: Special provisions for regulated industries or when specific regulatory requirements apply

6. Tax Provisions: Detailed tax provisions when cross-border elements or special tax considerations apply

7. Multi-currency Provisions: Required when the facility can be drawn in multiple currencies

What schedules should be included in a Inventory Financing Agreement?

1. Inventory Description: Detailed description and categorization of the inventory subject to financing

2. Facility Limits and Sub-limits: Breakdown of facility amounts, advance rates, and any sub-limits by inventory category

3. Form of Drawdown Request: Template for requesting drawdowns under the facility

4. Condition Precedent Documents: List of required documents and evidence for satisfying conditions precedent

5. Secured Locations: List and details of approved locations where financed inventory may be stored

6. Reporting Requirements: Templates and specifications for required inventory and financial reports

7. Security Documents: Forms of security documents, including pledge agreements and guarantees

8. Pricing and Fees: Detailed breakdown of profit rates, fees, and calculation methodologies

9. Insurance Requirements: Specific insurance requirements and minimum coverage amounts

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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