Working Capital Loan Agreement - England and Wales

Working Capital Loan Agreement for the United Kingdom

Working Capital Loan Agreement Template for England and Wales

A Working Capital Loan Agreement under English and Welsh law is a legally binding contract between a lender and borrower that establishes the terms and conditions for providing short-term financing to support a company's operational needs. The agreement details loan amount, interest rates, repayment terms, security arrangements, and borrower obligations while ensuring compliance with UK financial regulations and lending practices.

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What is a Working Capital Loan Agreement?

The Working Capital Loan Agreement is essential for businesses seeking short-term financing to manage their day-to-day operations. Under English and Welsh law, this agreement provides a structured framework for lenders to extend credit while protecting their interests through specific covenants, representations, and security arrangements. The document is commonly used when companies need funding for inventory, payroll, or other operational expenses, and includes detailed provisions for drawdown, repayment, and default scenarios. It incorporates regulatory requirements from UK financial authorities and standard market practices in commercial lending.

What sections should be included in a Working Capital Loan Agreement?

1. Parties: Identifies and defines the lender and borrower, including their registered addresses and company details

2. Background: Context of the loan, purpose of the agreement, and relationship between the parties

3. Definitions: Key terms and their meanings used throughout the agreement, including financial and technical terms

4. Facility: Details of the loan amount, purpose, availability period, and drawdown mechanics

5. Interest: Interest rate, calculation method, payment terms, and default interest provisions

6. Repayment: Repayment schedule, prepayment terms, and payment mechanics

7. Representations and Warranties: Statements of fact by the borrower regarding their legal, financial, and operational status

8. Covenants: Ongoing obligations of the borrower including financial covenants and information requirements

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

10. Fees and Expenses: Details of arrangement fees, commitment fees, and other costs

11. Payments: Payment mechanics, business day conventions, and currency provisions

12. Changes to Parties: Assignment and transfer provisions

13. Notices: Communication methods and contact details for formal notices

14. Governing Law and Jurisdiction: Confirmation of English law as governing law and jurisdiction of English courts

What sections are optional to include in a Working Capital Loan Agreement?

1. Security: Details of any collateral, guarantees, or other security arrangements

2. Conditions Precedent: Conditions to be met before initial drawdown and subsequent drawdowns

3. Insurance: Required insurance coverage and maintenance obligations

4. Tax Gross Up and Indemnities: Tax-related provisions and indemnification obligations

5. Increased Costs: Provisions dealing with regulatory changes affecting the lender's costs

What schedules should be included in a Working Capital Loan Agreement?

1. Schedule 1 - Conditions Precedent: List of required documents and conditions for drawdown

2. Schedule 2 - Form of Drawdown Notice: Template for requesting loan disbursements

3. Schedule 3 - Repayment Schedule: Detailed payment dates and amounts if term loan structure

4. Schedule 4 - Security Documents: List and copies of security documentation if loan is secured

5. Schedule 5 - Form of Compliance Certificate: Template for periodic confirmation of financial covenant compliance

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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Relevant legal definitions

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Relevant Industries

Real Estate
Property Management
Student Housing
Corporate Housing

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Property Management
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Relevant Roles

Property Manager
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Industries

Consumer Credit Act 1974: Primary legislation governing consumer credit agreements, particularly relevant if the borrower is an individual or small partnership

Financial Services and Markets Act 2000: Key legislation regulating financial services and markets in the UK, establishing regulatory framework for lending activities

Unfair Contract Terms Act 1977: Legislation controlling unfair terms in contracts, particularly exclusion and limitation clauses

Consumer Rights Act 2015: Legislation protecting consumer rights, applicable if the loan agreement involves consumer lending

Law of Property Act 1925: Fundamental property law legislation, relevant if the loan agreement involves any form of security over property

FCA Regulations: Financial Conduct Authority regulations and guidelines governing lending practices and consumer protection

PRA Requirements: Prudential Regulation Authority requirements ensuring financial stability and proper risk management in lending

CONC Rules: Consumer Credit Sourcebook rules providing detailed regulations for consumer credit activities

Money Laundering Regulations 2017: Regulations requiring proper due diligence and anti-money laundering measures in financial transactions

Companies Act 2006: Primary legislation governing company operations, relevant for corporate borrowers

Insolvency Act 1986: Legislation dealing with insolvency proceedings and creditor rights

Late Payment of Commercial Debts Act 1998: Legislation governing interest on late payments in commercial transactions

Financial Collateral Arrangements Regulations 2003: Regulations governing financial collateral arrangements in lending transactions

UK GDPR and Data Protection Act 2018: Legislation ensuring proper handling and protection of personal data in financial transactions

Contract Law Principles: Common law principles including offer, acceptance, consideration, and intention to create legal relations

Doctrine of Unconscionability: Common law principle preventing enforcement of unfair or unconscionable contract terms

Principles of Equity: Legal principles ensuring fairness and justice in contractual relationships

Liquidated Damages Rules: Common law rules distinguishing between valid liquidated damages and unenforceable penalties in contracts

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Interest Loan Agreement

A legal agreement under English and Welsh law establishing terms for a loan without interest charges.

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Download a Standard Template

What is a Working Capital Loan Agreement?

What sections should be included in a Working Capital Loan Agreement?

What sections are optional to include in a Working Capital Loan Agreement?

What schedules should be included in a Working Capital Loan Agreement?

Authors

Alex Denne

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