Demand Loan And Term Loan Template for England and Wales

A Demand Loan And Term Loan agreement is a versatile financing document that combines two distinct lending structures under England and Wales law. This hybrid arrangement allows lenders to provide both immediate callable credit facilities and structured term lending within a single comprehensive agreement. You benefit from having flexibility in both short-term working capital needs and longer-term financing requirements, while ensuring full compliance with UK financial services legislation.

When do you need this document?

You need this agreement when your business requires multiple types of financing from the same lender. Commercial property developers frequently use these arrangements to fund both acquisition costs through term loans and construction expenses via demand facilities. Manufacturing companies often require this structure to finance equipment purchases with term loans while maintaining working capital flexibility through demand facilities. Professional services firms use these agreements to fund office expansions with term loans while accessing demand facilities for cash flow management. Investment companies employ this structure to finance portfolio acquisitions through term loans while maintaining liquidity through demand facilities.

Key legal considerations

Your agreement must clearly distinguish between the demand and term loan facilities, specifying separate limits, purposes, and repayment terms for each. Interest rate provisions require careful drafting to address different rates for each facility type and compound interest calculations. Security arrangements must adequately cover both facilities, with appropriate ranking and enforcement mechanisms. Default events need comprehensive definition, particularly addressing cross-default provisions between the two facilities. Representations and warranties must cover both the borrower's ongoing obligations and specific requirements for each facility type. You should include detailed drawdown procedures, specifying conditions precedent for accessing each facility. The agreement must address set-off rights, allowing the lender to apply payments across both facilities appropriately.

Legal requirements in England and Wales

Under the Consumer Credit Act 1974, if the borrower is a consumer, you must comply with strict licensing, documentation, and disclosure requirements, including provision of adequate explanations and cooling-off periods. The Financial Services and Markets Act 2000 establishes the regulatory framework requiring appropriate authorisation for lending activities and compliance with FCA rules on responsible lending. The Consumer Rights Act 2015 governs fairness in consumer contracts, requiring transparency in terms and protection against unfair contract provisions. The Unfair Contract Terms Act 1977 regulates exclusion clauses and liability limitations, particularly relevant in commercial lending arrangements. When property security is involved, the Law of Property Act 1925 governs creation and enforcement of charges, requiring proper registration and compliance with statutory requirements. Your agreement must include clear termination provisions, specify governing law and jurisdiction clauses, and ensure all parties have appropriate legal capacity and authority to enter the arrangement.