Facility Letter Template Free Download India PDF/Word

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Title: Facility Letter Format

Need a reliable Facility Letter Format to formalize your credit facilities with banks in India? Our ready-to-use Facility Letter Format in PDF and Word ensures you get the funding your business needs without delays.

What is a Facility Letter? A Facility Letter Format is a crucial document issued by banks or financial institutions outlining the terms and conditions of a credit facility extended to a borrower. Commonly used in India for business loans, working capital facilities, or term loans, this legal template specifies the amount, interest rates, repayment schedules, and covenants. Whether you're a startup seeking growth capital or an established company expanding operations, having a precise Facility Letter Format is essential for smooth financial transactions.

Why is a Facility Letter Format Important? In the competitive Indian financial landscape, a well-drafted Facility Letter Format protects both lender and borrower by clearly defining obligations. It minimizes disputes over terms like drawdown procedures, security requirements, and default events. Legally binding under Indian banking regulations, including those from the RBI, this document ensures compliance and provides a strong foundation for your financing needs. Using our customizable Facility Letter Sample saves time and reduces legal risks, making it a must-have for entrepreneurs and finance professionals.

Key Elements of a Facility Letter Format Every professional Facility Letter Format should include:

Parties Involved: Details of the lender (bank) and borrower (company/individual).
Facility Details: Type (e.g., overdraft, term loan), sanctioned amount, tenure, and drawdown limits.
Interest and Fees: Applicable rates, calculation methods, and processing/administrative charges.
Repayment Terms: Schedule, prepayment options, and penalties.
Security and Collateral: Mortgages, hypothecation, or guarantees required.
Conditions Precedent: Documents needed before first disbursement.
Covenants: Financial ratios, reporting requirements, and events of default.
Governing Law: Typically Indian law, with jurisdiction clauses.
Signatures: Authorized signatories from both parties.

Our Facility Letter Sample incorporates all these elements, tailored for Indian courts and company requirements.

Who Should Use This Facility Letter Format? This versatile legal template is ideal for:

SMEs and MSMEs applying for bank loans under schemes like CGTMSE.
Corporates negotiating working capital or project finance.
Real estate developers securing construction finance.
Exporters needing trade finance facilities.
Individuals or partnerships for personal loans against property. Common in civil and commercial contexts across India, it's perfect for use cases in Mumbai, Delhi, Bangalore, and beyond.

Download Your Customizable Facility Letter Format Now Get instant access to our premium Facility Letter Format in editable Word or PDF for quick customization. While a free download version is available for basic needs, upgrade to the full legal template for advanced features like AI-generated custom clauses. Ready to use and compliant with Indian standards—start securing your facilities today!

Important Note This Facility Letter Format is a customizable sample designed for convenience. Always consult a legal expert or financial advisor to tailor it to your specific situation and ensure full compliance. For related documents, explore our Non-Disclosure Agreement Format, Loan Agreement Sample, or Term Sheet Template—all optimized for India with free download options in PDF/Word format.

FACILITY LETTER

Non-Judicial

FACILITY LETTER

M/s. ?????..

???????..

..................???

Dear Sir,

Grant of working capital facilities

We?????..Bank, are pleased to offer you the working capital facilities upto a maximum of Rs . ?????..for meeting a part of your working capital needs on the terms and conditions set out herein:

1. You shall open cash credit account at our?????..Branch for operating the said facilities. The said facilities shall be drawn in phases as may be agreed upon between us.

2. Interest shall be charged on the cleared daily balance upto actual payment at the rate of ?????..% p.a. The rate of interest is liable to be increased or decreased in terms of Reserve Bank of India directives on such loan. Where interest is charged by us at a concessionary rate because of the said facilities being granted under the Interest Subsidy Scheme or any other scheme formulated by the government and/or Reserve Bank of India, the concessionary rate or rates of interest shall stand withdrawn and tile usual normal rate or rates of interest as mentioned earlier shall become effective and we will be entitled to charge such rate or rates of interest and you shall pay to us the difference between such concessionary rate or rates and the usual normal rate or rates of the interest as mentioned above applicable at the maternal time to the said facilities and such difference shall become due and payable by you from the date of withdrawal, modification and/or variation or any such scheme(s) becomes effective.

3.You shall repay the loan under the said facilities forthwith on demand of all such amounts as may be standing to the debit of your account, together with interest, costs, charges, expenses and other moneys thereon at the rate or rates as may be applicable thereto as set out in the Schedule I hereunder written. If you fail to repay the said amount on the due dates, you may be treated as defaultor and we will be entitled to invoke the provisions as to defaults as hereinafter stated.

4.The said facilities together with interest, costs, charges, expenses and other moneys payable in respect thereof will be secured in our favour by a first charge by way of hypothecation and/or pledge of your current assets, namely stocks of raw materials, semi?finished and finished goods, stores and spares, bills receivable and book debts and all other movable properties, both present and future. You will place the assets and such goods, movables pledged to us in our possession and control and in such manner that such possession and control may be apparent and indisputable. You shall put the boards in the godown, factories and other places where the pledged movable and other assets are stored or kept, stating that the said goods and assets are pledged to the .................. Bank, we may release the said goods and assets for carrying on the manufacturing or other activity and you will keep such released goods, assets and sale proceeds in trust for us.

5. You will also procure irrevocable and unconditional guarantees in the form prescribed by us, from your directors and/or others for the payment and discharge by you to us of the sum of Rs ?????..and interest, costs, charges, expenses and other moneys due and payable by you to us under or in respect of the said facilities.

6.Our officers, employees, agents or nominees will be entitled to access to the godowns at all times, where the goods or assets pledged are stored or kept and they shall have the right to remove the goods and assets so stored and held in the godown whenever desired by us.

7.You will make out a good and marketable title to your properties to the satisfaction of our solicitors and you will comply with all such formalities as may be necessary or required for the said purpose.

8. You will maintain such security margins as may be stipulated by us. The Current Asset cover shall not be less than 1.33 at any point of time and you will at all times maintain a sufficient quantity of the securities to provide the Asset cover as may be required by us at our discretion and in the event of any deficiency in such Asset cover, you shall forthwith provide additional securities to restore such asset cover to the original level or pay the equivalent in cash in the event of additional securities not being available.

9. You will utilise the facilities for meeting a part of your working capital requirements and for no other purpose. You will submit statements under the Quarterly Information System (QIS) in the form prescribed by us from time to time each quarter, regularly to us and furnish to us full particulars of cash credit account or other account and the drawings in the said cash credit account or other account shall be regulated on the basis of such statements. Such statements shall be submitted within ten days after the expiry of each quarter.

10. You will pay or cause to be paid all rents, rates, taxes, payments and outgoings that are payable in respect of your immovable properties.

11. In case of your failure to repay the said facilities or pay interest or any portion thereof or you commit breach of any covenant to be observed or performed on your part herein contained, or if the security created in our favour becomes unenforceable or if any distress or execution is levied or enforced against your property or any part thereof or any person, firm or company takes any steps for or obtains an order for the appointment of a Receiver or if you make compromises with your creditors or you shall suspend or cease to carry on business or fail to conduct your business to our satisfaction, then the entire amount standing to the cash credit account or other account together with interest, costs, charges, expenses and other moneys payable in respect thereof shall forthwith become payable at once at our option.

12. You will keep all goods, assets, book?debts, immovable or movable properties hypothecated, pledged or otherwise charged to us as security for any of the said facilities in good condition and insure the said goods and assets, etc. against loss or damage in our and your joint names with an insurance company approved by us and for an amount as we may consider necessary and you will deliver the insurance policies to us when required by us to do so. If you fail to effect such insurance, we may insure the said goods, movable and other assets and immovable properties against fire and/or such risk in such joint names and debit the premium and other charges to your account.

13. Notwithstanding anything contained in the Indian Contract Act or any other law for the time being in force or in this letter, the payment made by you will be appropriated in the following manner

(a) First towards costs, charges, expenses or/and other moneys due and payable or becoming due and payable to us

(b) Secondly towards interest due and payable and/or accruing due and payable to us.

(c) Lastly towards repayment of the amount of any instalment(s) of the principal sum due and payable and becoming due or payable to us.

14. During the term of the said facilities and until repayment of the loan and other moneys, obligations and liabilities you shall not without our prior written consent, create or permit to subsist or extend any mortgage, charge, pledge, lien or any other encumbrance or security whatsoever over any part of your or its present or future undertaking, property, assets, goods or factor, sell, assign, discount or otherwise dispose off any book debts, claims or securities or make any change in the nature of your business or sell or dispose off or deal with the whole or any substantial part of your undertaking, property, assets, except for stock sold or disposed off in the ordinary course of business or give any guarantee or indemnities in respect of any of the obligations.

15. You have to irrevocably constitute and appoint us to be your true and lawful attorney to do and execute for and in your name and on your behalf to take over, carry on the business and complete engagements and contracts, to demand and receive all debts, sums of money, dividends, interest and dues of whatever nature, to realise all the assets whether movable or immovable and to do all other acts which we will consider necessary for the purpose of granting, realisation and receipt of the money or moneys under these facilities.

16. We shall not be liable for any failure to perform our obligations and duties hereunder or for any action of the Government, local or statutory authority or any strike, riot, civil disturbance or Act of God.

17. Any forbearance in enforcing payment or giving time or otherwise showing indulgence for making payment or otherwise shall not preclude us from exercising any right or remedy against you.

18. The said facilities are being granted to you and you will not be entitled to assign your rights hereunder.

Please return the duplicate of this letter duly accepted by your duly authorised officials within ?????..days of the issue of this letter, failing which it will be considered that you are not interested in availing of the said facilities and this offer will lapse. Please enclose the certified copy of the resolution passed by the Board of Directors of your company accepting these facilities and for creating security in our favour. Thereafter you may execute security deed and create hypothecation/p ledge of your assets and properties in terms of this letter.

Schedule I Above referred to

Yours faithfully,

For and on behalf of Bank

?????.. Regional Manager

Accepted and Agreed ...

For and on behalf of?????..Co. Ltd.

Managing Director

?????..

Director.

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Important Guidelines

Title: Guideline for Drafting a Facility Letter

Usage and Purpose: A Facility Letter, often used in commercial lending, is a formal document that outlines the terms and conditions of a financial facility or loan agreement offered by a lender to a borrower. It serves as a binding contract, detailing the loan amount, interest rates, repayment terms, covenants, and other key provisions. Facility Letters are used in various financial transactions, such as business loans, credit facilities, or project financing, to provide clarity and legal enforceability to the lending arrangement.

Common Mistakes to Avoid:

Incomplete Information: Ensure that the Facility Letter contains all essential terms, including the loan amount, interest rates, repayment schedule, and any conditions or covenants. Missing details can lead to misunderstandings.

Ambiguity: Use clear and unambiguous language to avoid potential disputes or misinterpretations regarding the terms and conditions of the facility.

Failure to Review Legal Compliance: Ensure that the Facility Letter complies with local laws and regulations, including any necessary licenses or approvals.

Overlooking Risk Mitigation: Identify and address potential risks in the transaction, such as collateral requirements or default provisions, to protect the interests of both parties.

Not Seeking Legal Review: Have the Facility Letter reviewed by legal counsel to confirm its enforceability and alignment with both parties' interests.

Failure to Communicate: Maintain open communication with the borrower throughout the drafting process and allow for their input to avoid misunderstandings later.

Neglecting Signatures: Ensure that the document is signed and dated by authorized representatives of both the lender and borrower to make it legally binding.

Ignoring Documentation Retention: Keep a well-organized record of all signed Facility Letters and related documents for future reference and audit purposes.

By following these guidelines and avoiding common mistakes, parties involved in a Facility Letter can establish a clear and legally sound lending arrangement, reducing the risk of disputes and ensuring that both lender and borrower understand and fulfill their obligations under the agreement.

Frequently asked questions

What is a Facility Letter?→

A Facility Letter is a legal agreement issued by banks or financial institutions in India, detailing the sanctioned credit facility terms including loan amount, interest rate, tenure, and repayment conditions.

Is this Facility Letter template legally valid in India?→

Yes, this Facility Letter template adheres to Indian laws like the Indian Contract Act, 1872, but requires customization, stamping, and legal review for full enforceability in India.

Does a Facility Letter require stamp duty in India?→

Facility Letters are treated as loan agreements and attract stamp duty under the Indian Stamp Act; rates vary by state based on the facility amount—affix appropriate stamps before execution.

What format is the Facility Letter available for download?→

Download the Facility Letter in editable Microsoft Word format or non-editable PDF, suitable for immediate use or customization in India.

Can I customize or edit the Facility Letter template?→

Absolutely, the Facility Letter is fully customizable in Word format; modify clauses to fit your specific credit terms, parties, and Indian banking regulations.

When and who should use a Facility Letter in India?→

Corporates, SMEs, or individuals use Facility Letters in India upon credit sanction from lenders; essential for documenting working capital, term loans, or overdraft facilities.