Term Loan Agreement Template for the United Arab Emirates

A Term Loan Agreement is your primary legal document for securing fixed-term financing in the United Arab Emirates. This comprehensive contract establishes the rights, obligations, and terms between you as a borrower and your lender, whether it's a bank, financial institution, or private lender. The agreement provides a structured framework for medium to long-term financing, typically ranging from one to ten years, and is essential for major business investments, acquisitions, or capital projects.

When do you need this document?

You'll require a Term Loan Agreement when seeking substantial financing for specific business purposes that cannot be met through short-term credit facilities. This includes funding for equipment purchases, facility expansions, acquisition of other businesses, refinancing existing debt, or financing large-scale projects. Unlike revolving credit facilities, term loans provide a lump sum that you repay according to a predetermined schedule. You'll also need this agreement when lenders require detailed documentation of the loan terms, security arrangements, and your ongoing obligations throughout the loan period.

Key legal considerations

Your Term Loan Agreement must address several critical legal elements to protect both parties' interests. The facility terms section should clearly specify the loan amount, purpose restrictions, availability period, and drawdown procedures. Repayment provisions must detail the amortization schedule, interest calculation methods, and prepayment options. Security arrangements typically include personal guarantees, corporate guarantees, or charges over assets, which must be properly documented and registered. The agreement should include comprehensive representations and warranties about your financial condition, business operations, and legal capacity. Covenants section will outline your ongoing obligations, including financial ratios, reporting requirements, and operational restrictions. Events of default clauses specify circumstances that could trigger immediate repayment, while cure periods and waivers provide flexibility for minor breaches.

Legal requirements in United Arab Emirates

Your Term Loan Agreement must comply with UAE Federal Law No. 5 of 1985 (Civil Code) governing contract formation and validity, and UAE Federal Law No. 18 of 1993 (Commercial Code) regulating commercial lending transactions. Interest rates must comply with UAE Central Bank regulations, and Islamic financing structures must adhere to Sharia principles where applicable. If you're a UAE company, your borrowing capacity must align with UAE Federal Decree Law No. 32 of 2021 (Commercial Companies Law) and your constitutional documents. Security arrangements over movable assets require compliance with UAE Federal Law No. 20 of 2016 (Pledge of Movables), including proper registration procedures. The agreement must be executed in accordance with UAE notarization requirements if real estate security is involved, and foreign lenders may need to appoint a UAE process agent for legal service.