The Line of Credit Agreement is a fundamental financing document used in the Philippine banking sector when a lender agrees to provide a borrower with flexible, revolving credit up to a predetermined limit. This agreement is particularly valuable for businesses requiring ongoing access to funds for working capital, seasonal fluctuations, or growth opportunities. The document must comply with Philippine banking regulations, including the General Banking Law of 2000, Truth in Lending Act, and relevant BSP circulars. It typically includes comprehensive terms covering credit limits, drawdown mechanisms, interest calculations, security arrangements, and borrower covenants, while incorporating specific Philippine legal requirements for financial agreements. The agreement can be customized for various business sizes and sectors, from SMEs to large corporations, ensuring appropriate risk management and regulatory compliance.
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1. Parties: Identifies and provides full details of the lender and borrower
2. Background: Explains the context and purpose of the credit facility
3. Definitions: Defines key terms used throughout the agreement
4. The Facility: Details the credit limit, purpose, and nature of the line of credit
5. Conditions Precedent: Lists conditions that must be satisfied before the facility becomes available
6. Drawdown: Specifies the process and requirements for drawing funds from the facility
7. Interest and Fees: Details interest rates, calculation methods, and all applicable fees
8. Repayment Terms: Outlines repayment obligations, minimum payments, and payment schedules
9. Representations and Warranties: States the assertions and guarantees made by the borrower
10. Covenants: Lists ongoing obligations and restrictions on the borrower
11. Events of Default: Defines circumstances constituting default and their consequences
12. Security: Describes any collateral or security arrangements for the facility
13. Notices: Specifies how formal communications between parties should be made
14. Governing Law and Jurisdiction: Establishes Philippine law as governing law and specifies jurisdiction for disputes
15. Miscellaneous: Contains standard boilerplate provisions including severability, entire agreement, and amendments
1. Guarantees: Include when there are third-party guarantors for the facility
2. Insurance: Include when specific insurance requirements are imposed on the borrower
3. Assignment and Transfer: Include when either party may need to transfer rights under the agreement
4. Increased Costs: Include for facilities where regulatory changes might affect the lender's costs
5. Multiple Borrowers: Include when the facility is extended to multiple borrowers
6. Electronic Banking Provisions: Include when online banking facilities are part of the agreement
7. Foreign Currency Provisions: Include when drawings can be made in multiple currencies
1. Schedule 1 - Facility Terms: Detailed terms including credit limit, interest rates, fees, and charges
2. Schedule 2 - Conditions Precedent Documents: List of required documents and conditions to be satisfied
3. Schedule 3 - Drawdown Notice Form: Template for borrower to request drawings under the facility
4. Schedule 4 - Calculation of Interest and Fees: Detailed methodology for calculating interest and fees
5. Schedule 5 - Security Details: Detailed description of any security or collateral arrangements
6. Appendix A - Compliance Certificate: Template for periodic compliance certification by borrower
7. Appendix B - Financial Covenants: Detailed financial ratios and requirements to be maintained
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