Revolving Credit Facilities

Revolving Credit Facilities are among the most flexible business financing instruments, allowing companies to borrow and repay funds as needed within a set limit. Unlike a standard term loan where funds are disbursed once, a revolving credit operates on the principle of a credit card but on a much larger scale and for corporate purposes. This is vital for managing a company's working capital, covering cash flow gaps, and ensuring operational continuity. However, such agreements are often burdened with complex conditions, hidden fees, and strict covenants. Legal.ge enables you to find lawyers who will assist you in negotiating with banks and securing the credit line on the best terms.

What does the Revolving Credit Facility service cover?

Legal services in this area include full support at all stages of the credit relationship:

• Analysis of the General Credit Agreement: Detailed study of contract terms defining the limit volume, validity period, interest rate type (fixed or floating), and drawdown rules.
• Structuring Security: Preparation of mortgage and pledge agreements securing the credit line, including pledges on inventory.
• Negotiating Financial Covenants: Legal assessment of restrictions imposed by the bank (e.g., Debt to EBITDA ratio) to ensure the company does not breach them during operations.
• Refinancing and Restructuring: Changing the terms of an existing credit line, increasing the limit, or transferring to another bank.
• Monitoring Drawdown Conditions: Ensuring all Conditions Precedent are met for receiving each tranche of funds.

Common scenarios and needs

Businesses use revolving credit for various operational needs:

• Seasonal Activities: When an agribusiness or tourism company needs funds to purchase inventory before the season starts, while revenue comes in later.
• Covering Receivables: When clients delay payments, the company uses the line to cover current expenses (salaries, taxes).
• Tenders and Guarantees: When a company needs quick access to financial resources to participate in a tender.
• Unforeseen Expenses: Equipment breakdown or unexpected increase in raw material prices.

Georgian Legal Framework

Regulation of revolving credit facilities is based on:

• Civil Code of Georgia: Specifically, articles on loans and credit regulating the rights and obligations of the parties.
• Law of Georgia on Activities of Commercial Banks: Establishes general principles of credit issuance and supervision rules for banks.
• Law of Georgia on Public Registry: Important for registering mortgages on real estate collateral.
• National Bank Regulations: Regarding asset classification and credit risk management.

Service Process Step-by-Step

Collaboration with specialists on Legal.ge involves:

1. Negotiation with the Bank (Term Sheet): Agreeing on key commercial terms (rate, term, limit) from a legal perspective.
2. Contract Review: Analyzing clauses in the bank's standard agreement and identifying risks for the client.
3. Registration of Security: Signing mortgage or pledge agreements at the Public Service Hall or MIA Service Agency.
4. Activation of the Line: Completing all legal formalities and gaining access to credit resources.

Why Legal.ge?

Credit agreements often contain complex legal terminology and "traps," ignoring which can put a company in a difficult financial position. Lawyers presented on Legal.ge specialize in banking law and have experience dealing with leading financial institutions. They will help ensure your revolving credit line is not a burden but an effective instrument for business development.