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Simple English definitions for legal terms
committed credit facility
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A quick definition of committed credit facility:
A committed credit facility is an agreement between a borrower and a lender where the lender promises to lend money to the borrower if certain conditions are met. The borrower can choose to reduce or end the credit facility at any time, but the lender can only end it if the borrower doesn't follow the agreement. These types of credit facilities are usually long-term and can last up to five years.
A more thorough explanation:
A committed credit facility is a type of loan agreement between a borrower and a lender. In this agreement, the lender agrees to lend a specific amount of money to the borrower, provided that the borrower meets certain conditions. Once these conditions are met, the lender is obligated to lend the money.
For example, let's say a company needs to borrow $1 million to expand its business. The company negotiates a committed credit facility with a bank. The bank agrees to lend the money, but only if the company meets certain conditions, such as maintaining a certain level of revenue or profitability. If the company meets these conditions, the bank is obligated to lend the money.
Committed credit facilities are generally long-term, lasting up to five years. The borrower can terminate or reduce the credit facility at any time, while the lender can only terminate if the borrower defaults on the credit facility.