A letter agreement in which a lender sets out the terms on which it is prepared to lend money to the borrower. It is generally accompanied by a term sheet which sets out the terms of the loan.

In leveraged buyouts (LBOs) by private equity firms, this letter is commonly known as a debt commitment letter, to distinguish it from an equity commitment letter. The lenders typically address the debt commitment letter to the acquisition vehicle formed for the LBO and commit to it to provide the debt financing at the closing of the transaction on satisfaction of certain conditions. The debt commitment letter is usually delivered (along with the equity commitment letter) to the seller (in a stock or asset sale) or target company (in a merger) when the acquisition agreement is executed to serve as evidence that the acquisition vehicle has sufficient funds to make the acquisition.

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