Revolving Credit Promissory Note Template for Australia

A revolving credit promissory note is a legally binding document that establishes a flexible credit facility between a lender and borrower in Australia. Unlike traditional fixed-term loans, this arrangement allows you to borrow, repay, and re-borrow funds up to a predetermined credit limit throughout the facility's term. This financial instrument combines the formal legal structure of a promissory note with the flexibility of a revolving credit line, making it an essential tool for businesses managing cash flow or requiring ongoing access to capital.

When do you need this document?

You'll need a revolving credit promissory note when establishing a flexible borrowing arrangement that allows multiple drawdowns and repayments. This is particularly valuable for businesses with seasonal cash flow variations, such as retail companies needing inventory financing before peak periods, or construction firms requiring funds for different project phases. The document is also essential when you need formal documentation for tax purposes or when lenders require structured repayment terms with interest calculations. Additionally, if you're a corporate borrower seeking working capital facilities from banks or financial institutions, this document provides the necessary legal framework while offering operational flexibility that fixed-term loans cannot match.

Key legal considerations

Several critical legal elements must be carefully structured in your revolving credit promissory note. The promise to pay clause must be unconditional and clearly specify the revolving nature of the facility, including maximum credit limits and available balance calculations. Interest rate provisions require precise definition, particularly if rates are variable or linked to benchmark rates like the Reserve Bank of Australia cash rate. Default and acceleration clauses need careful drafting to balance lender protection with borrower fairness, especially regarding cross-default provisions that could trigger early repayment. Security arrangements, if included, must comply with the Personal Property Securities Act 2009, and you should consider whether guarantees are required and how they interact with the revolving nature of the facility. Electronic execution provisions should align with the Electronic Transactions Act 1999 if digital signatures will be used.

Legal requirements in Australia

Australian law imposes specific requirements that your revolving credit promissory note must satisfy depending on the parties involved and facility size. Under the National Consumer Credit Protection Act 2009, if the borrower is an individual or the credit is provided for personal, domestic, or household purposes, additional disclosure requirements and responsible lending obligations apply. The Banking Act 1959 may impose requirements if the lender is an authorised deposit-taking institution, particularly regarding prudential standards and documentation. For business borrowers, while fewer consumer protection provisions apply, the facility must still comply with general contract law principles and may require registration under the Personal Property Securities Act if security interests are created. The Bills of Exchange Act 1909 governs the enforceability of promissory notes, requiring specific formalities in drafting and execution. Additionally, you must ensure compliance with state-based property law if real property security is involved, and consider stamp duty implications in relevant jurisdictions.