The Inventory Financing Agreement serves as a crucial financing instrument in Saudi Arabia's commercial landscape, enabling businesses to leverage their inventory assets for working capital needs. This document is particularly valuable for companies with significant inventory holdings seeking Sharia-compliant financing solutions. The agreement must comply with Saudi Arabian regulations, including the Commercial Pledge Law, Islamic Banking Control Law, and SAMA regulations. It typically includes comprehensive provisions for inventory valuation, monitoring mechanisms, security arrangements, and enforcement procedures. The document addresses both the financial institution's security requirements and the borrower's operational needs while ensuring all financing structures remain Sharia-compliant. This type of agreement is commonly used in trading, manufacturing, and retail sectors where businesses maintain substantial inventory levels and require flexible financing solutions.
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1. Parties: Identification of the financing institution and the borrower/customer, including their full legal names, commercial registration numbers, and authorized representatives
2. Background: Context of the financing arrangement, business relationship, and purpose of the inventory financing
3. Definitions: Comprehensive definitions of terms used throughout the agreement, including specific inventory-related terminology and Sharia-compliant financing concepts
4. Financing Facility: Details of the financing structure, including facility amount, purpose, and Sharia-compliant financing mechanism (e.g., Murabaha)
5. Security and Collateral: Description of inventory collateral, security interest creation, and perfection requirements under Saudi law
6. Conditions Precedent: Prerequisites for drawdown, including documentation, security perfection, and regulatory approvals
7. Representations and Warranties: Standard and inventory-specific representations regarding business, authority, and collateral
8. Covenants: Ongoing obligations including inventory maintenance, reporting, insurance, and Sharia compliance
9. Inventory Management: Requirements for storage, maintenance, inspection, and reporting of inventory
10. Events of Default: Circumstances constituting default and consequences, including enforcement rights
11. Enforcement: Rights and procedures for enforcing security over inventory under Saudi law
12. Governing Law and Jurisdiction: Application of Saudi law and jurisdiction of Saudi courts
13. Notices: Communication procedures between parties
14. Miscellaneous: Standard boilerplate provisions adapted to Saudi law requirements
1. Islamic Finance Provisions: Detailed Sharia compliance provisions - required if the financing institution requires specific Sharia structuring
2. Third Party Storage: Provisions for third-party warehouse arrangements - needed if inventory is stored by third parties
3. Import/Export Provisions: Additional provisions for international trade - required if inventory involves cross-border transactions
4. Insurance Trust: Specific provisions for insurance arrangements - needed if separate insurance trust structure is required
5. Multiple Currency Provisions: Currency conversion and handling - required if financing involves multiple currencies
6. Guarantees: Additional security provisions - needed if third-party guarantees are part of the security package
1. Schedule 1 - Inventory Description: Detailed description and categorization of eligible inventory
2. Schedule 2 - Storage Locations: List and details of approved storage facilities
3. Schedule 3 - Form of Drawdown Request: Standard form for requesting financing against inventory
4. Schedule 4 - Reporting Requirements: Ƶ and requirements for inventory reporting
5. Schedule 5 - Security Documents: List and copies of required security documentation
6. Schedule 6 - Calculation of Financing Amounts: Methodology for determining financing values against inventory
7. Appendix A - Required Insurance: Specific insurance requirements for inventory
8. Appendix B - Form of Compliance Certificate: Template for periodic compliance certification
Authors
Relevant legal definitions
Clauses
Relevant Industries
Manufacturing
Retail
Wholesale Distribution
Automotive
Electronics
Commodities Trading
Consumer Goods
Industrial Equipment
Pharmaceuticals
Food and Beverage
Construction Materials
Textile and Apparel
Relevant Teams
Legal
Finance
Treasury
Operations
Risk Management
Compliance
Supply Chain
Warehouse Operations
Credit
Islamic Banking
Security and Collateral
Commercial Banking
Relevant Roles
Chief Financial Officer
Treasury Manager
Finance Director
Commercial Director
Legal Counsel
Risk Manager
Inventory Manager
Operations Director
Credit Manager
Compliance Officer
Supply Chain Manager
Warehouse Manager
Islamic Finance Specialist
Corporate Banking Officer
Security Documentation Officer
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