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Loan Facility Letter for Germany

Loan Facility Letter Template for Germany

A Loan Facility Letter under German law is a formal document that establishes the terms and conditions of a loan facility between a lender and borrower. It must comply with German banking regulations (KWG) and civil law (BGB), particularly regarding documentation requirements, interest rate regulations, and consumer protection laws where applicable. The document outlines key terms including facility amount, interest rates, repayment terms, conditions precedent, representations, undertakings, and events of default, while being more concise than a full facility agreement. It serves as a binding agreement once accepted by all parties and must meet specific German law requirements for enforceability.

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What is a Loan Facility Letter?

The Loan Facility Letter is a crucial document used in German banking and finance transactions to establish and document loan arrangements. It serves as a more streamlined alternative to a full facility agreement while maintaining compliance with German regulatory requirements. Typically used for bilateral loans, smaller facilities, or where a less complex documentation structure is preferred, the Loan Facility Letter must comply with the German Civil Code (BGB) and Banking Act (KWG). It contains all essential elements required by German law, including facility terms, interest provisions, repayment obligations, and security arrangements if applicable. The document is particularly relevant for corporate lending, real estate financing, and general commercial loans where a balance between comprehensive documentation and efficiency is desired.

What sections should be included in a Loan Facility Letter?

1. Parties: Identification of the lender(s) and borrower(s), including registration details as required under German law

2. Date: Date of the facility letter

3. Salutation and Reference: Formal opening and reference to any prior discussions or agreements

4. Purpose: Clear statement of the purpose of the facility and intended use of funds

5. Facility Amount: The total amount of the facility being made available

6. Interest Rate: Specification of interest rate, calculation method, and payment dates

7. Availability Period: Period during which the facility can be drawn

8. Repayment Terms: Schedule of repayments, final maturity date, and prepayment provisions

9. Conditions Precedent: List of documents and conditions required before drawdown

10. Representations: Key representations by the borrower

11. Undertakings: Essential ongoing obligations of the borrower

12. Events of Default: Key events triggering default and remedies

13. Governing Law: Confirmation of German law governance

14. Acceptance: Instructions for acceptance and execution of the letter

What sections are optional to include in a Loan Facility Letter?

1. Security: Required if the facility is secured - details of collateral and security documents

2. Fees: Required if there are arrangement fees, commitment fees or other charges

3. Financial Covenants: Include for corporate borrowers where financial metrics need to be maintained

4. Guarantor Provisions: Required if the facility is guaranteed by third parties

5. Multi-currency Provisions: Include if the facility can be drawn in multiple currencies

6. Tax Gross-up: Include for cross-border transactions or where tax implications are material

7. Break Costs: Include for fixed rate facilities or where early repayment may trigger costs

What schedules should be included in a Loan Facility Letter?

1. Conditions Precedent Schedule: Detailed list of required documents and conditions

2. Drawdown Notice: Form of drawdown request to be used by borrower

3. Repayment Schedule: Detailed amortization schedule if applicable

4. Fee Schedule: Breakdown of all applicable fees and charges

5. Security Details: Detailed description of security assets and perfection requirements if secured

6. Interest Calculation Examples: Examples of interest calculations for clarity

7. Compliance Certificate: Form of compliance certificate if financial covenants are included

Authors

Alex Denne

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

Jurisdiction

Germany

Publisher

Ƶ

Document Type

Letter of Credit

Cost

Free to use
Relevant legal definitions



































Clauses






























Relevant Industries

Banking

Financial Services

Manufacturing

Real Estate

Infrastructure

Energy

Technology

Healthcare

Retail

Telecommunications

Transportation

Construction

Agriculture

Professional Services

Relevant Teams

Legal

Finance

Treasury

Credit Risk

Compliance

Banking Operations

Corporate Finance

Credit Administration

Transaction Management

Relationship Management

Documentation

Risk Management

Relevant Roles

Chief Financial Officer

Finance Director

Treasury Manager

Corporate Banker

Relationship Manager

Credit Risk Manager

Legal Counsel

Compliance Officer

Corporate Finance Manager

Banking Operations Manager

Credit Analyst

Loan Officer

Transaction Manager

Finance Manager

Banking Director

Senior Credit Officer

Industries








Teams

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