Term Facility Agreement Template for the United States

A Term Facility Agreement is a comprehensive legal document that governs fixed-term lending arrangements between financial institutions and borrowers. Under United States law, this agreement serves as the foundational contract for structured lending transactions, establishing the rights, obligations, and responsibilities of all parties involved in the credit facility.

When do you need this document?

You need a Term Facility Agreement when entering into formal lending arrangements for significant financial transactions. This document is essential for corporate acquisitions where borrowed funds will finance the purchase of another business or its assets. It's required for major capital expenditure projects, such as equipment purchases, facility expansions, or infrastructure development that require substantial upfront investment. The agreement is also necessary for refinancing existing debt obligations, allowing borrowers to restructure their financial commitments under new terms. Additionally, you'll need this document for syndicated lending arrangements where multiple financial institutions participate in providing credit to a single borrower.

Key legal considerations

Several critical legal elements must be carefully addressed in your Term Facility Agreement. The conditions precedent section requires particular attention, as these are mandatory requirements that must be satisfied before you can access loan funds, including corporate approvals, legal opinions, and financial covenant compliance. Interest rate provisions need precise documentation, including calculation methods, payment dates, and any applicable margin adjustments based on performance metrics. Security arrangements, if applicable, must clearly define collateral assets and enforcement mechanisms. Default and acceleration clauses require careful drafting to balance lender protection with borrower operational flexibility. Financial covenants, such as debt-to-equity ratios and minimum cash flow requirements, must be realistic and aligned with your business projections. Cross-default provisions linking this facility to other debt obligations need careful consideration to avoid unintended consequences.

Legal requirements in United States

United States federal banking laws impose specific compliance requirements on Term Facility Agreements. The Truth in Lending Act (TILA) mandates clear disclosure of credit terms, annual percentage rates, and total finance charges for consumer credit transactions. The Equal Credit Opportunity Act (ECOA) prohibits discrimination in lending decisions and requires specific notice provisions. Under the Dodd-Frank Act, larger financial institutions must comply with enhanced capital requirements and risk management standards that may affect loan terms. Federal Reserve Regulations U and X apply to margin lending and securities-related credit facilities, requiring specific documentation and compliance procedures. The Bank Secrecy Act and USA PATRIOT Act impose customer identification and anti-money laundering requirements on lenders. State usury laws vary significantly across jurisdictions and may cap permissible interest rates, requiring careful analysis of applicable state regulations. Additionally, state lending license requirements may apply depending on the lender type and transaction structure.