Revolving Agreement Template for Saudi Arabia

A Revolving Agreement is a crucial legal document that establishes a flexible, Sharia-compliant credit facility between a financial institution and a borrower in Saudi Arabia. Unlike traditional term loans, this agreement allows you to draw funds up to a predetermined limit, repay them, and draw again as needed throughout the facility term. The document must comply with Islamic finance principles, eliminating conventional interest in favor of profit-sharing structures that align with Sharia law requirements.

When do you need this document?

You need a Revolving Agreement when your business requires ongoing access to working capital for operational needs, seasonal fluctuations, or project financing. This document becomes essential when you want the flexibility to borrow and repay multiple times without renegotiating terms each time. Manufacturing companies often use these agreements to manage inventory cycles, while trading businesses rely on them for import financing and cash flow management. Construction companies frequently utilize revolving facilities to bridge payment gaps between project milestones, and retail businesses depend on them to manage seasonal inventory requirements.

Key legal considerations

The agreement must clearly define the facility limit, drawdown procedures, and Sharia-compliant profit calculation methods. You need to understand the security requirements, which may include personal guarantees, corporate guarantees, or asset-based security arrangements. The document should specify events of default, covenant requirements, and the financial institution's rights upon breach. Particular attention must be paid to the profit structure, ensuring it complies with Islamic principles by avoiding riba (prohibited interest) through mechanisms such as murabaha or wakala structures. The agreement must also address currency provisions, governing law clauses, and dispute resolution mechanisms that align with Saudi commercial practices.

Legal requirements in Saudi Arabia

Under Saudi Commercial Law (Royal Decree No. M/32), the agreement must contain clear identification of all parties, precise facility terms, and unambiguous obligations. The Banking Control Law (Royal Decree No. M/5) requires compliance with SAMA regulations governing credit facilities and banking activities. All terms must align with Islamic Shariah principles, requiring review and approval by qualified Sharia advisors or committees. The document must be executed in accordance with Saudi commercial formalities, including proper authorization by corporate representatives and compliance with signature requirements. If the facility exceeds certain thresholds, additional regulatory notifications to SAMA may be required, and the agreement must include provisions for ongoing regulatory compliance monitoring throughout the facility term.