Inventory Financing Agreement Template for Saudi Arabia

The Inventory Financing Agreement serves as a crucial financing instrument in Saudi Arabia's commercial landscape, enabling businesses to leverage their inventory assets for working capital needs. This document is particularly valuable for companies with significant inventory holdings seeking Sharia-compliant financing solutions. The agreement must comply with Saudi Arabian regulations, including the Commercial Pledge Law, Islamic Banking Control Law, and SAMA regulations. It typically includes comprehensive provisions for inventory valuation, monitoring mechanisms, security arrangements, and enforcement procedures. The document addresses both the financial institution's security requirements and the borrower's operational needs while ensuring all financing structures remain Sharia-compliant. This type of agreement is commonly used in trading, manufacturing, and retail sectors where businesses maintain substantial inventory levels and require flexible financing solutions.

1. Parties: Identification of the financing institution and the borrower/customer, including their full legal names, commercial registration numbers, and authorized representatives

2. Background: Context of the financing arrangement, business relationship, and purpose of the inventory financing

3. Definitions: Comprehensive definitions of terms used throughout the agreement, including specific inventory-related terminology and Sharia-compliant financing concepts

4. Financing Facility: Details of the financing structure, including facility amount, purpose, and Sharia-compliant financing mechanism (e.g., Murabaha)

5. Security and Collateral: Description of inventory collateral, security interest creation, and perfection requirements under Saudi law

6. Conditions Precedent: Prerequisites for drawdown, including documentation, security perfection, and regulatory approvals

7. Representations and Warranties: Standard and inventory-specific representations regarding business, authority, and collateral

8. Covenants: Ongoing obligations including inventory maintenance, reporting, insurance, and Sharia compliance

9. Inventory Management: Requirements for storage, maintenance, inspection, and reporting of inventory

10. Events of Default: Circumstances constituting default and consequences, including enforcement rights

11. Enforcement: Rights and procedures for enforcing security over inventory under Saudi law

12. Governing Law and Jurisdiction: Application of Saudi law and jurisdiction of Saudi courts

13. Notices: Communication procedures between parties

14. Miscellaneous: Standard boilerplate provisions adapted to Saudi law requirements