Revolving Promissory Note Template for Saudi Arabia

A revolving promissory note is a specialized financial instrument that combines the formal requirements of a promissory note with the flexibility of a revolving credit facility. In Saudi Arabia, this document must strictly comply with both the Commercial Papers Regulation and Islamic Sharia law, making it a unique legal instrument that provides ongoing financing while adhering to religious and regulatory requirements.

When do you need this document?

You need a revolving promissory note when establishing ongoing business relationships that require flexible financing arrangements. This document is essential for trade financing where you need to regularly draw funds for inventory purchases and repay them upon sales completion. Manufacturing businesses use these notes to manage seasonal cash flow variations, drawing funds during production periods and repaying during sales cycles. Import-export companies rely on revolving promissory notes to finance letters of credit and trade transactions with varying amounts and timing. Small and medium enterprises often use these instruments to establish working capital facilities with suppliers or financial institutions, allowing them to manage operational expenses while maintaining Sharia compliance.

Key legal considerations

The most critical consideration is ensuring Sharia compliance throughout the document structure and implementation. Your revolving promissory note must avoid any elements of riba (usury) and instead incorporate acceptable Islamic financing mechanisms such as murabaha (cost-plus financing) or wakala (agency arrangements). You must clearly specify the revolving facility terms, including the maximum credit limit, draw-down procedures, and repayment schedules. The document should include detailed provisions for default scenarios, enforcement mechanisms, and dispute resolution procedures that align with Saudi commercial law. You need to ensure all mandatory elements of a promissory note are present: unconditional promise to pay, specific monetary amount, definite payment terms, and proper identification of all parties. Consider including guarantor provisions and collateral arrangements to strengthen enforceability while maintaining Islamic law compliance.

Legal requirements in Saudi Arabia

Under the Commercial Papers Regulation (Royal Decree No. M/37), your revolving promissory note must contain specific mandatory elements including the place and date of issuance, an unconditional promise to pay, and complete identification of the maker and beneficiary. The document must be written in Arabic or include certified Arabic translations for enforceability in Saudi courts. You must ensure compliance with SAMA Banking Control Law requirements if the arrangement involves regulated financial institutions. The note should reference applicable Sharia supervisory board approvals if structured as an Islamic financing product. Commercial registration requirements may apply depending on the parties involved and the nature of the underlying business relationship. You must consider the Commercial Courts Law provisions for dispute resolution and enforcement, ensuring your document includes proper jurisdiction and governing law clauses that align with Saudi legal requirements.