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Pre Financing Agreement Template for Indonesia

A Pre-Financing Agreement under Indonesian law is a crucial document that establishes the terms and conditions for preliminary financing arrangements between a financial institution and a borrower. The agreement, governed by Indonesian banking regulations and civil law, outlines the conditions precedent, facility amount, disbursement mechanisms, and security arrangements. It serves as a preliminary framework for the financing relationship, ensuring compliance with Indonesian Financial Services Authority (OJK) regulations while protecting both lender and borrower interests through clearly defined rights, obligations, and risk mitigation measures.

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What is a Pre Financing Agreement?

The Pre-Financing Agreement is a fundamental document used in Indonesian financing transactions when parties need to establish preliminary terms for a financing arrangement before the main facility agreement. This document is particularly crucial in projects or ventures requiring substantial capital investment where detailed due diligence and conditions precedent need to be satisfied. The agreement, governed by Indonesian law and regulations, typically includes key terms such as facility amount, conditions for disbursement, basic security arrangements, and essential covenants. It serves as a bridge between initial financing discussions and the final facility agreement, providing both parties with legally binding commitments while allowing flexibility for detailed terms to be finalized. The document must comply with Indonesian Financial Services Authority (OJK) regulations and banking laws, making it essential for both financial institutions and borrowers to carefully consider their rights and obligations under this preliminary arrangement.

What sections should be included in a Pre Financing Agreement?

1. Parties: Identification of the financing institution and the recipient, including their complete legal names, registration numbers, and authorized representatives

2. Background: Context of the financing arrangement, purpose of the facility, and brief description of the underlying project or business requirement

3. Definitions: Detailed definitions of terms used throughout the agreement, including financial terms, technical terms, and references to Indonesian regulatory requirements

4. Facility Amount and Purpose: Specification of the pre-financing amount, currency, and detailed purpose for which the facility is being provided

5. Conditions Precedent: Prerequisites that must be satisfied before the facility becomes available, including required documents and regulatory approvals

6. Disbursement Mechanism: Procedures and requirements for drawing down the facility, including notice requirements and documentation

7. Interest and Fees: Details of interest rates, calculation methods, fee structures, and payment schedules

8. Repayment Terms: Terms and schedule for repayment, including prepayment provisions and consequences

9. Security and Collateral: Description of any security or collateral arrangements required for the facility

10. Representations and Warranties: Standard and specific representations and warranties from both parties

11. Covenants: Positive and negative undertakings by the recipient, including financial covenants and reporting requirements

12. Events of Default: Circumstances constituting default and consequences thereof

13. Governing Law and Jurisdiction: Specification of Indonesian law as governing law and jurisdiction for dispute resolution

14. Miscellaneous: Standard boilerplate provisions including notices, amendments, and severability

What sections are optional to include in a Pre Financing Agreement?

1. Currency Conversion: Required when the facility involves multiple currencies or foreign exchange considerations

2. Tax Provisions: Detailed section on tax implications when the financing arrangement has specific tax considerations or cross-border elements

3. Assignment and Transfer: Include when either party may need to transfer rights or obligations under the agreement

4. Force Majeure: Detailed force majeure provisions when required by the nature of the underlying project or business

5. Step-In Rights: Include when the financing institution requires the right to take control of certain assets or projects in default scenarios

6. Insurance Requirements: Detailed insurance obligations when specific insurance coverage is required for the facility

7. Environmental and Social Compliance: Required when the financing is tied to specific environmental or social responsibility requirements

What schedules should be included in a Pre Financing Agreement?

1. Schedule 1 - Facility Details: Detailed breakdown of the facility amount, interest rates, fees, and payment schedules

2. Schedule 2 - Conditions Precedent Documents: Complete list of required documents and conditions to be satisfied

3. Schedule 3 - Form of Drawdown Notice: Template for requesting disbursements under the facility

4. Schedule 4 - Security Documents: List and copies of all security documents and collateral arrangements

5. Schedule 5 - Financial Covenants: Detailed financial ratios and requirements to be maintained

6. Appendix A - Project Details: Detailed description of the project or business purpose for which financing is provided

7. Appendix B - Corporate Documents: Copies of relevant corporate authorizations and registrations

8. Appendix C - Compliance Certificates: Templates for ongoing compliance reporting

Authors

Alex Denne

Head of Growth (Open Source Law) @ tiktok成人版 | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents

Jurisdiction

Indonesia

Document Type

Financing Agreement

Cost

Free to use

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