Negotiating Financing Commitment Letters Toolkit

Resources to assist counsel in understanding the purpose and importance of financing commitment letters, including current trends, and in negotiating the terms typically included in these letters.

Practical Law Finance

In many lending transactions, the borrower enters into a commitment letter ( www.practicallaw.com/4-382-3352) with its lenders to ensure that the funds will be available when needed on the terms and conditions set out in the commitment letter. The basic terms of the loan are typically agreed to in a term sheet ( www.practicallaw.com/2-382-3876) attached to the commitment letter. Knowing that the funds will be available is especially important in acquisition financings where the funds are being used to acquire the stock or assets of another company. In the absence of a financing out ( www.practicallaw.com/0-382-3467) , the failure of a lender to provide the necessary financing for an acquisition may subject the borrower to lawsuits and/or the payment of significant penalties to the seller in the form of break-up fees ( www.practicallaw.com/9-382-3284) .

This Toolkit includes continuously maintained resources to provide information on:

  • The customary terms on which lenders are willing to extend financing.

  • Current trends in commitment letters, term sheets and fee letters.

  • The ways a borrower can tighten the terms and conditions of the loan.

  • The terms a lender can request to protect its investment.

 

Practice Notes

 

Standard Documents and Clauses

 

Articles

 
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