Uncommitted Line of Credit Confirmation Letter

Summary

This template is a letter agreement from a financial institution confirming an uncommitted line of credit to its borrower. This template includes practical guidance, drafting notes, and alternate and optional clauses. Under a line of credit that is uncommitted, the lender has the sole discretion as to whether to advance a loan to the borrower, regardless of whether the borrower has met all the conditions precedent to obtaining the advance. The lender has no obligation to lend and may refuse to fund any loan request under the uncommitted line of credit. Some banks and other depository financial institutions may be inclined to offer uncommitted facilities to avoid having to satisfy capital adequacy requirements imposed on such institutions in connection with committed facility assets. For detailed information on capital adequacy requirements on banks and other depository institutions, see Dodd-Frank Act Bank Capital Requirements and Basel III Risk-Based Capital Requirements. Uncommitted lines of credit are typically documented with some type of loan agreement between the lender and borrower. Such agreements expressly state that the lender has no commitment to lend and may vary as to the other terms such as demand provisions, maturity or termination, and events of default or acceleration. This template is a letter agreement from a financial institution to a borrower confirming the terms of an uncommitted line of credit and includes many common loan agreement terms that may be customized to suit the particular transaction. Capitalized terms need to be defined for the specific transaction and may be conformed to any related credit agreement between the lender and the borrower. For additional guidance, see Structuring a Financing Transaction — Types of Credit Facilities.