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Inventory Financing Agreement for the United States

Inventory Financing Agreement Template for United States

An Inventory Financing Agreement is a legal document governed by U.S. law that establishes the terms and conditions under which a lender provides financing secured by a borrower's inventory. The agreement is primarily governed by Article 9 of the Uniform Commercial Code and includes provisions for security interests, borrowing base calculations, reporting requirements, and default remedies. It details the rights and obligations of both parties, including inventory valuation methods, insurance requirements, and collateral monitoring procedures.

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What is a Inventory Financing Agreement?

The Inventory Financing Agreement is essential for businesses seeking to leverage their inventory as collateral for working capital financing. This document type is commonly used in the United States when companies need to finance the purchase or holding of inventory but want to avoid traditional term loans. The agreement must comply with UCC Article 9 requirements and typically includes detailed provisions about eligible inventory, advance rates, borrowing base calculations, and monitoring requirements. It's particularly relevant for businesses with significant inventory holdings or seasonal inventory needs, providing a flexible financing solution while protecting the lender's security interest in the collateral.

What sections should be included in a Inventory Financing Agreement?

1. Parties: Identifies the lender and borrower with full legal names and addresses

2. Background/Recitals: Sets out the context of the financing arrangement and purpose

3. Definitions: Defines key terms used throughout the agreement including 'Eligible Inventory', 'Borrowing Base', 'Advance Rate'

4. Facility Terms: Details of the credit facility including amount, purpose, and term

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

6. Conditions Precedent: Conditions that must be met before funding

7. Representations and Warranties: Borrower's statements about its legal status and inventory

8. Covenants: Ongoing obligations of the borrower

9. Events of Default: Circumstances constituting default and consequences

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

1. Insurance Requirements: Specific insurance requirements for inventory when dealing with high-value or sensitive inventory

2. Third Party Agreements: Provisions relating to warehouse agreements or bailment arrangements when inventory is stored by third parties

3. Foreign Inventory: Special provisions for inventory located outside the US when dealing with international inventory

What schedules should be included in a Inventory Financing Agreement?

1. Schedule of Inventory Locations: List of all locations where financed inventory is stored

2. Form of Borrowing Base Certificate: Template for periodic reporting of eligible inventory

3. Permitted Liens Schedule: List of pre-existing liens allowed under the agreement

4. Form of Compliance Certificate: Template for periodic covenant compliance reporting

5. Insurance Requirements Schedule: Detailed insurance specifications for inventory

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

United States

Publisher

Ƶ

Document Type

Financing Agreement

Cost

Free to use
Clauses






























Industries

Uniform Commercial Code - Article 9: Governs secured transactions, including creation, perfection, and priority of security interests in personal property. Critical for inventory financing agreements as it provides rules for collateral.

Uniform Commercial Code - Article 2: Covers sales of goods and may be relevant when the inventory financing agreement involves purchase and sale of goods.

Uniform Commercial Code - Article 1: Provides general provisions and definitions applicable to all UCC transactions, including good faith and commercial reasonableness standards.

Truth in Lending Act (TILA): Federal law requiring disclosure of credit terms and costs to borrowers, ensuring transparency in lending transactions.

Equal Credit Opportunity Act (ECOA): Prohibits discrimination in credit transactions based on race, color, religion, national origin, sex, marital status, age, or source of income.

Federal Trade Commission Act: Prohibits unfair or deceptive trade practices in commerce, affecting terms and conditions in financing agreements.

U.S. Bankruptcy Code: Establishes creditor rights and priorities in bankruptcy proceedings, crucial for protecting lender interests in case of borrower default.

State UCC Variations: State-specific modifications to the UCC that may affect how secured transactions are handled in different jurisdictions.

State Usury Laws: State-specific limitations on interest rates and finance charges that can be charged in lending transactions.

State Lending License Requirements: State-specific regulations governing who can engage in lending activities and under what conditions.

Securities Regulations: Federal securities laws that may apply if the financing arrangement involves securities or security-like instruments.

Banking Regulations: Federal and state banking laws governing lending practices, including Dodd-Frank Act provisions and Federal Reserve regulations.

UCC Filing Requirements: Rules for filing UCC-1 financing statements to perfect security interests and establish priority against other creditors.

State Consumer Protection Laws: State-specific regulations protecting consumers and businesses from unfair lending practices and establishing additional disclosure requirements.

Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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