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Term Loan Facilities

What is a covenant in a loan agreement?

Covenants are promises made by the borrower to do (positive covenants) or not do (negative covenants) certain things, such as maintaining specific financial ratios.

Can I negotiate the bank's standard template?

Yes, especially for large corporate loans. While banks have rigid policies, specific clauses regarding default events and covenants are negotiable.

What happens if I miss a repayment?

Missing a payment is an "Event of Default." The bank can charge penalty interest and, if not resolved, accelerate the loan (demand full repayment immediately).

Does a foreign company need a local entity to get a loan?

Generally, Georgian banks prefer lending to Georgian entities (LLCs) due to easier enforcement of security, though exceptions exist for multinationals.

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Term Loan Facilities represent the backbone of corporate financing for long-term projects. This is an instrument where the bank lends a specific amount of money for a defined period with a predetermined repayment schedule. Term loans are primarily used for Capital Expenditures (CapEx), real estate acquisition, or business expansion. Such large-scale transactions require meticulous legal analysis, as they impose long-term obligations on the company and often restrict its operational freedom through various prohibitions and conditions (Covenants). Legal.ge connects you with experienced banking lawyers who ensure that your loan agreement is balanced and does not contain terms fatal to your business.

What does the Term Loan service cover?

Specialists on Legal.ge offer full legal accompaniment:

  • Drafting/Reviewing Loan Agreements: Examining the project proposed by the bank, ensuring key terms (amount, term, interest, repayment schedule) match negotiated conditions.
  • Negotiating Covenants: Softening financial (e.g., Debt Service Coverage Ratio) and non-financial (e.g., ban on asset disposal) covenants.
  • Analyzing Events of Default: Minimizing the list of circumstances that could give the bank the right to demand early repayment of the loan.
  • Security Package: Preparing and registering mortgage, pledge, and surety agreements.
  • Preparing Legal Opinions: In international transactions, issuing an opinion on the company's authority to take the loan.

Common scenarios and needs

Term loans are most often used in the following cases:

  • Real Estate Acquisition: Buying an office, warehouse, or land plot for business.
  • Construction and Renovation: Financing the construction of a hotel, factory, or other commercial facility.
  • Equipment Purchase: Upgrading production lines or importing expensive machinery.
  • M&A Financing: Financing the acquisition of another company or business share (Acquisition Finance).

Georgian Legal Framework

The legal regulation of term loans is based on:

  • Civil Code of Georgia: Defines general principles of loan agreements, interest accrual rules, and liability of parties.
  • Law of Georgia on Activities of Commercial Banks: Regulates banks' authority and credit policy.
  • Law of Georgia on Entrepreneurs: Important for the correctness of corporate decisions (minutes of partners' meeting) when taking a loan.
  • National Bank Regulations: Regarding lending conditions and consumer rights.

Service Process Step-by-Step

The process usually includes the following steps:

  1. Term Sheet Agreement: Outlining key transaction parameters in a non-binding document.
  2. Due Diligence: Legal and financial check of the borrower by the bank (lawyer assists in preparing documents).
  3. Drafting Agreements: Preparing and correcting main and ancillary (security) agreements.
  4. Signing and Registration: Executing the deal and registering it in the Public Registry.
  5. Disbursement: Receiving the tranche after fulfilling conditions.

Why Legal.ge?

Banks always offer "standard" agreements that are fully tailored to their interests. Without a qualified lawyer, you may sign terms that will hinder your business growth in the future or lead to asset loss. Specialists on Legal.ge will protect your interests at the negotiation table and ensure that loan terms are fair and transparent.

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Specialists for this service

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