Revolving Line Of Credit Promissory Note Template for Saudi Arabia

A Revolving Line Of Credit Promissory Note is a critical financing document that allows you to establish a flexible credit facility with a bank or financial institution in Saudi Arabia. Unlike traditional term loans, this arrangement provides ongoing access to funds up to a predetermined credit limit, enabling you to borrow, repay, and reborrow as your business needs fluctuate. The document serves as both your unconditional promise to repay borrowed amounts and a comprehensive agreement governing the credit relationship under Saudi Arabian law.

When do you need this document?

You need this promissory note when establishing a revolving credit facility for working capital management, seasonal business fluctuations, or ongoing operational expenses. Businesses commonly use this arrangement to manage cash flow gaps, finance inventory purchases, or cover short-term operational costs. Manufacturing companies often require revolving credit to purchase raw materials ahead of production cycles, while retail businesses use it to stock inventory before peak seasons. Service companies may need this facility to bridge payment delays from clients or fund project expenses before receiving payment. The revolving nature makes it ideal when you cannot predict exact borrowing amounts or timing but need guaranteed access to funds.

Key legal considerations

Your promissory note must include specific clauses addressing the revolving nature of the credit facility, including maximum credit limits, drawdown procedures, and repayment terms. The document should clearly define profit rate calculation methods that comply with Shariah principles, avoiding conventional interest structures that constitute riba. You must ensure the agreement includes provisions for collateral or guarantees if required, and specifies events of default that could trigger acceleration of the entire credit facility. The document should address cross-default provisions, meaning defaults on other obligations could affect this facility. Additionally, you need clauses covering modification procedures, as revolving facilities often require adjustments to credit limits or terms during their lifetime.

Legal requirements in Saudi Arabia

Under the Banking Control Law (Royal Decree No. M/5), your revolving credit promissory note must comply with SAMA regulations governing credit documentation and banking practices. The document must adhere to Shariah principles on riba, ensuring profit structures are Islamic law compliant rather than conventional interest-based arrangements. You must include proper identification of all parties, including authorized representatives and any guarantors, with corporate borrowers requiring board resolutions authorizing the credit facility. The Commercial Court Law requires specific formatting and content for enforceability in Saudi courts, including clear unconditional payment promises and defined repayment terms. For corporate borrowers, you need appropriate corporate authorization documentation, and the promissory note may require notarization depending on the credit amount and bank requirements. SAMA guidelines also mandate specific disclosures regarding fees, profit calculations, and borrower rights within the credit arrangement.