The Credit Extension Letter is a crucial document in German banking practice, used when a financial institution has approved a credit facility and needs to formally communicate its commitment to the borrower. It serves as an official confirmation of the bank's willingness to extend credit under specified terms and conditions. The letter is commonly used in both corporate and retail banking contexts, providing a bridge between initial credit application and final credit documentation. Under German law, this document must comply with various regulatory requirements, including those set by BaFin (Federal Financial Supervisory Authority) and the German Banking Act (KWG). The letter typically precedes more detailed credit documentation and may be referenced in subsequent formal agreements. It's particularly important in German business culture, where formal written communication is highly valued and legally significant.

1. Letterhead and Date: Bank's official letterhead, including full legal name, address, and contact details, plus current date

2. Recipient Details: Full name and address of the borrower, including any reference numbers

3. Subject Line: Clear indication that this is a Credit Extension Letter (Kreditzusage)

4. Salutation: Formal greeting to the recipient

5. Credit Amount and Terms: Clear statement of the credit amount being extended and key financial terms

6. Interest Rate: Specification of the applicable interest rate, whether fixed or variable, and calculation method

7. Repayment Terms: Details of repayment schedule, installments, and duration

8. Security and Collateral: Required security or collateral for the credit extension

9. Key Conditions: Essential conditions that must be met for the credit to be drawn

10. Validity Period: Period for which the credit offer remains valid

11. Closing and Signatures: Formal closing, including authorized signatures from bank representatives