Revolving Loan Agreement Template for the United Arab Emirates

A revolving loan agreement is a flexible credit facility that allows you to borrow, repay, and re-borrow funds up to a predetermined limit throughout the agreement term. Unlike traditional term loans, this arrangement provides ongoing access to credit as your business needs fluctuate, making it ideal for managing working capital and operational cash flow requirements.

When do you need this document?

You need a revolving loan agreement when your business requires flexible financing for ongoing operations rather than a single, large expenditure. Manufacturing companies use these facilities to manage seasonal inventory requirements and supplier payments. Trading businesses rely on revolving credit to finance import/export activities and bridge gaps between purchase and sale cycles. Service companies utilize these agreements to smooth cash flow during project-based work or when client payments are delayed. Real estate developers often establish revolving facilities to fund construction phases before permanent financing becomes available.

Key legal considerations

Your revolving loan agreement must clearly define the facility amount, drawdown procedures, and repayment terms to avoid disputes. Interest calculation methods and payment schedules require precise specification, particularly regarding compound interest and default rates. Security provisions are critical – you must understand which assets secure the facility and the lender's rights upon default. Personal guarantees from directors or shareholders create additional liability that extends beyond the corporate borrower. Covenants impose ongoing obligations on your business operations, including financial ratio maintenance, reporting requirements, and restrictions on additional borrowing. Cross-default clauses can trigger acceleration if you breach other credit agreements. Financial covenants typically include debt-to-equity ratios, minimum cash flow requirements, and restrictions on dividend distributions.

Legal requirements in United Arab Emirates

Under UAE Federal Law No. 18 of 1993 (Commercial Code), commercial lending agreements must comply with specific formalities and disclosure requirements. The UAE Central Bank Law No. 14 of 2018 regulates banking operations and establishes mandatory provisions for credit facilities offered by licensed financial institutions. Interest rates must comply with Central Bank Circular No. 28/2000, which sets maximum permissible rates for commercial transactions. For Islamic finance structures, agreements must incorporate Sharia-compliant mechanisms such as Murabaha or Ijarah arrangements to avoid prohibited interest (riba). Security documentation requires registration with relevant UAE authorities – mortgages over real property must be registered with the Land Department, while pledges over moveable assets require appropriate perfection steps. The UAE Civil Code governs general contractual principles, requiring clear identification of parties, consideration, and lawful purpose. Foreign corporate borrowers must provide certified translations of constitutional documents and demonstrate legal capacity to enter into UAE credit agreements through properly executed board resolutions and powers of attorney.