Revolving Credit Facility Agreement Template for Saudi Arabia

A Revolving Credit Facility Agreement is a comprehensive legal document that governs flexible financing arrangements between Islamic financial institutions and corporate borrowers in Saudi Arabia. Unlike traditional term loans, this agreement allows you to access funds repeatedly up to a predetermined limit, repay amounts, and redraw as needed throughout the facility term. The document must be structured to comply with Shariah principles, typically utilizing Islamic finance mechanisms such as Murabaha (cost-plus financing) or Tawarruq (commodity trading) to achieve the revolving credit functionality while avoiding prohibited interest-based transactions.

When do you need this document?

You need a Revolving Credit Facility Agreement when your business requires ongoing access to working capital or flexible financing that can be drawn and repaid multiple times. This is particularly common for trading companies that need seasonal funding, manufacturers requiring inventory financing, or service providers managing cash flow fluctuations. The agreement is essential for businesses seeking to maintain liquidity while optimizing borrowing costs, as you only pay profit on amounts actually drawn. It's also required when establishing credit lines for letters of credit, bank guarantees, or other trade finance instruments that support your business operations.

Key legal considerations

The agreement must include detailed profit calculation mechanisms that comply with Shariah principles, avoiding any elements of riba (interest). Key clauses should address the facility limit, availability period, drawdown procedures, and repayment terms. Security provisions may include personal or corporate guarantees, pledges over assets, or other collateral arrangements governed by the Commercial Pledge Law. The document should specify events of default, including breaches of financial covenants or Shariah compliance requirements. Cross-default provisions, material adverse change clauses, and representations and warranties must be carefully drafted to protect the lender while providing operational flexibility for your business.

Legal requirements in Saudi Arabia

Under Saudi law, revolving credit facilities must comply with SAMA regulations governing credit facilities, including documentation, reporting, and risk management requirements. The agreement must incorporate Shariah compliance certifications from qualified Shariah advisors and include mechanisms for ongoing Shariah monitoring. All Islamic finance structures used must be approved by the institution's Shariah committee and comply with AAOIFI standards where applicable. The document should include proper governing law clauses specifying Saudi Arabian law and jurisdiction of Saudi courts or approved arbitration mechanisms. For international parties, process agent appointments may be required, and the agreement must comply with foreign investment regulations if applicable.