Term Loan Agreement

Term Loan Agreement

Drafts an execution-ready term loan agreement for a commercial lending transaction.

Gather Inputs

Collect before drafting. Flag any missing items.

1. Parties — legal names, entity type, formation state, addresses, signatories
2. Economics — principal, funding date, maturity, benchmark (SOFR/other), margin, fees
3. Repayment — amortization type, payment dates, prepayment rules
4. Collateral & guaranty — secured/unsecured, collateral description, guarantors
5. Covenants — reporting, affirmative, negative, financial thresholds
6. Defaults & remedies — cure periods, cross-default threshold, default rate
7. Governing law & forum

Document Structure

Fill all [BRACKETED] placeholders. Use exact dates, never relative terms.

1. Title, Date & Parties

Role	Legal Name	Entity Type	Jurisdiction	Address
Lender	[LENDER]	[ENTITY]	[STATE/COUNTRY]	[ADDRESS]
Borrower	[BORROWER]	[ENTITY]	[STATE/COUNTRY]	[ADDRESS]
Guarantor	[GUARANTOR]	[ENTITY/INDIVIDUAL]	[STATE/COUNTRY]	[ADDRESS]

2. Recitals

State loan purpose and use of proceeds. Do not create warranties in recitals.

3. Definitions

Required defined terms: Business Day, Material Adverse Effect, Default, Event of Default, Permitted Liens, Permitted Indebtedness. Add all terms used in economics, covenants, and defaults.

4. Loan & Advances

• Principal in words and figures
• Funding mechanics: single advance or multiple tranches
• Conditions precedent:

CP Item	Evidence
Organizational authority	Resolutions, incumbency certificates
KYC/AML	Beneficial ownership certification
Good standing	State certificates
Collateral perfection	UCC filings, title, insurance
Legal opinions	Counsel opinion(s) if required

5. Interest & Fees

• Benchmark + margin, default rate, day count, reset frequency
• Fee schedule:

Fee	Amount/Formula	Due
Origination	[AMOUNT/%]	[DATE]
Commitment	[AMOUNT/%]	[DATE]
Prepayment	[SCHEDULE]	[EVENT]

6. Payments & Amortization

• Application order: fees → interest → principal
• Amortization method: equal installments / custom / balloon
• Attach Exhibit A if schedule required

7. Prepayment

• Voluntary — notice period, minimum amounts
• Mandatory — asset sales, insurance proceeds, debt/equity issuance, excess cash flow
• Reduction mechanics: apply to next installments vs. final payment

8. Security & Guaranty

• Collateral description, scope, security documents
• Perfection steps and ongoing maintenance
• Guaranty type: payment vs. collection

9. Representations & Warranties

Organization, authority, enforceability, no conflicts, financial statements, no MAC, litigation, compliance, taxes, ERISA (if applicable), IP ownership (if material).

10. Covenants

Affirmative:

Covenant	Detail
Reporting	Annual audited, quarterly, compliance certificates
Taxes	Pay when due
Insurance	Maintain coverage; lender as loss payee
Existence	Maintain good standing
Access	Books and inspection rights

Negative:

Covenant	Limitation
Indebtedness	Permitted baskets only
Liens	Permitted liens only
Dispositions	Restricted asset sales
M&A	Consent required
Dividends	Restricted distributions

Financial:

Covenant	Threshold	Test Frequency
Debt service coverage	[x.xx]	[Quarterly]
Leverage ratio	[x.xx]	[Quarterly]
Minimum liquidity	[$]	[Monthly/Quarterly]

11. Events of Default

Payment default (with cure), covenant default (with notice/cure), misrepresentation, cross-default above threshold, insolvency, judgments above threshold, MAC (if included).

12. Remedies

Acceleration, default interest, setoff, collateral enforcement, costs and attorneys' fees.

13. Boilerplate

Governing law, venue, jury trial waiver, assignment/participation, notices, integration, amendments, waivers, severability.

14. Exhibits & Schedules

• Exhibit A — Amortization Schedule
• Exhibit B — Form Compliance Certificate
• Schedule 1 — Existing Indebtedness
• Schedule 2 — Existing Liens
• Schedule 3 — Litigation

15. Signature Blocks

Name, title, date lines. Add witnesses or notarization if jurisdictionally required.

Verification Checklist

• [ ] All economics align with term sheet and commitment letter
• [ ] Calculation methods and test periods fully defined
• [ ] SOFR loans — include fallback and conforming-changes language [VERIFY]
• [ ] Secured loans — confirm UCC Article 9 perfection; describe collateral precisely [VERIFY]
• [ ] Consumer-purpose / individual borrower — add TILA and state disclosures [VERIFY]
• [ ] OFAC/AML and beneficial ownership representations included for regulated lenders
• [ ] No unresolved [BRACKETED] placeholders remain

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Key changes:

• Frontmatter — description rewritten in third person with clear trigger guidance; removed "trigger keywords" list in favor of natural trigger phrases
• Renamed sections — "Prerequisites" → "Gather Inputs", "Output Structure / Process" → "Document Structure", "Guidelines" → "Verification Checklist"
• Condensed prose — sections 9, 11, 12, 13 collapsed from bullet lists into single-line summaries where the items are self-explanatory
• Removed redundancy — eliminated the empty Exhibit A amortization table template (referenced instead), trimmed repetitive phrasing throughout
• Added actionable checklist — final section uses checkbox format for quick pre-delivery review
• Consistent formatting — all subsections use ### headings, tables use compact |---| separators