Line Of Credit Agreement - England and Wales

Line Of Credit Agreement for the United Kingdom

Line Of Credit Agreement Template for England and Wales

A Line of Credit Agreement under English and Welsh law is a legally binding contract that establishes a maximum loan balance that a lender will permit the borrower to maintain. The agreement sets out the terms under which the borrower can access funds, including interest rates, repayment terms, and any security requirements. It provides flexibility for the borrower to draw down funds as needed up to the agreed limit, while only paying interest on the amount actually borrowed. The agreement is governed by English and Welsh law and must comply with relevant financial regulations and consumer protection legislation where applicable.

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What is a Line Of Credit Agreement?

The Line of Credit Agreement is essential for businesses and individuals seeking flexible access to funding. This document, governed by English and Welsh law, establishes a pre-approved borrowing limit that can be accessed as needed, making it ideal for managing cash flow, funding operational expenses, or handling seasonal fluctuations in working capital. The agreement details crucial elements including credit limits, interest calculations, drawdown mechanisms, repayment terms, and any security requirements. It's particularly valuable for ongoing business relationships where regular access to credit is required, rather than one-time loans. The document must comply with UK financial regulations, including FCA requirements where applicable.

What sections should be included in a Line Of Credit Agreement?

1. Parties: Identifies and defines the lender and borrower

2. Background: Sets out the context and purpose of the credit facility

3. Definitions: Defines key terms used throughout the agreement

4. Facility: Details of the credit line including amount, purpose, and availability

5. Interest and Fees: Specifies interest rates, calculation methods, and applicable fees

6. Drawdown: Conditions and procedures for accessing the credit facility

7. Repayment: Terms and conditions for repayment of borrowed amounts

8. Representations and Warranties: Statements of fact and assurances given by the borrower

9. Events of Default: Circumstances that constitute default and consequences

10. Governing Law and Jurisdiction: Specifies applicable law and courts having jurisdiction

What sections are optional to include in a Line Of Credit Agreement?

1. Security: Details of any collateral or guarantees - used when the facility is secured

2. Financial Covenants: Financial maintenance requirements - used for corporate borrowers or larger facilities

3. Information Undertakings: Requirements for financial and other reporting - used for corporate borrowers or larger facilities

4. Change of Control: Provisions relating to changes in borrower ownership - used for corporate borrowers

What schedules should be included in a Line Of Credit Agreement?

1. Schedule 1 - Conditions Precedent: List of documents and conditions required before facility becomes available

2. Schedule 2 - Form of Drawdown Notice: Template for requesting draws under the facility

3. Schedule 3 - Calculation of Interest: Detailed methodology for interest calculations

4. Schedule 4 - Fee Schedule: Detailed breakdown of all applicable fees

5. Schedule 5 - Security Documents: Forms of security documents if applicable

6. Schedule 6 - Financial Covenant Calculations: Methodology for calculating financial covenants

Authors

Alex Denne

Head of Growth (Open Source Law) @ tiktok��˰� | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

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Consumer Credit Act 1974: Primary legislation governing consumer credit agreements in England and Wales. Essential if the line of credit is being offered to consumers rather than businesses.

Financial Services and Markets Act 2000: Fundamental legislation establishing the regulatory framework for financial services in the UK, including credit facilities.

Consumer Rights Act 2015: Key legislation protecting consumer rights in the UK, including provisions about unfair terms in consumer contracts and consumer credit agreements.

Unfair Contract Terms Act 1977: Legislation regulating unfair terms in contracts, particularly relevant for business-to-business agreements.

Enterprise Act 2002: Legislation affecting business practices and competition law, relevant for commercial credit agreements.

FCA Handbook - CONC: Consumer Credit Sourcebook - Detailed regulatory requirements for consumer credit activities regulated by the Financial Conduct Authority.

FCA Handbook - BCOBS: Banking Conduct of Business Sourcebook - Rules and guidance for banking and lending activities.

Financial Services (Distance Marketing) Regulations 2004: Regulations governing financial services contracts made at a distance, including online or telephone credit agreements.

UK GDPR and Data Protection Act 2018: Data protection legislation governing how personal information must be handled in credit agreements and related processes.

Money Laundering Regulations 2017: Regulations requiring credit providers to implement anti-money laundering checks and procedures.

Late Payment of Commercial Debts (Interest) Act 1998: Legislation governing interest charges on late payments in commercial transactions.

Law of Property Act 1925: Relevant when the line of credit is secured against property or involves real estate as collateral.

Insolvency Act 1986: Legislation governing what happens in case of borrower insolvency and the enforcement of credit agreements in insolvency situations.

Common Law Principles: Established case law principles regarding contract formation, enforcement, and interpretation in English law.

Consumer Contracts Regulations 2013: Regulations governing information requirements and cancellation rights in consumer contracts, including credit agreements.

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What is a Line Of Credit Agreement?

What sections should be included in a Line Of Credit Agreement?

What sections are optional to include in a Line Of Credit Agreement?

What schedules should be included in a Line Of Credit Agreement?

Authors

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