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An Inventory Financing Agreement is a crucial financing instrument in the Indian market that enables businesses to obtain working capital funding using their inventory as collateral. This document is typically used when companies require regular financing against their stock-in-trade, raw materials, or finished goods. The agreement must comply with Indian secured lending regulations, particularly the SARFAESI Act and RBI guidelines, and includes detailed provisions for inventory monitoring, valuation methodologies, security creation, and enforcement mechanisms. It's particularly relevant for manufacturing and trading companies that maintain significant inventory levels and need working capital optimization. The document addresses specific Indian legal requirements for creating and perfecting security interests over movable assets and includes necessary provisions for registration of charges under the Companies Act, 2013.

1. Parties: Identifies the financing party (lender) and the borrower, including their legal status and registered addresses

2. Background: Sets out the context of the financing arrangement and the borrower's business

3. Definitions and Interpretation: Defines key terms used in the agreement and establishes interpretation rules

4. Facility and Purpose: Details of the financing facility, including amount, purpose, and terms of drawdown

5. Security Interest: Creation and perfection of security interest over the inventory

6. Conditions Precedent: Prerequisites that must be satisfied before the facility becomes available

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

8. Covenants: Positive and negative obligations of the borrower during the facility period

9. Inventory Management: Requirements for maintaining, storing, and managing the financed inventory

10. Monitoring and Reporting: Borrower's obligations regarding inventory reports and lender's inspection rights

11. Events of Default: Circumstances that constitute default and their consequences

12. Enforcement Rights: Lender's rights and remedies upon default

13. Indemnification: Borrower's obligations to indemnify the lender

14. Costs and Expenses: Allocation of costs related to the facility and security

15. Notices: Process for giving formal notices under the agreement

16. Governing Law and Jurisdiction: Specifies Indian law as governing law and jurisdiction for disputes

17. Miscellaneous: Standard boilerplate provisions including amendments, waivers, and severability