– Since 2010, credit banks no longer need to inform their borrowers when they change interest rates. This clause gives the Bank the freedom to change interest rates based on its base rate fluctuations. If you chose the option with fixed interest rates, you should not be too sure that it will always remain the same. Indeed, the bank reserves the right to reset the interest rate at a higher level after a period of 2 to 5 years in the event of an increase in interest rates. Read this clause carefully, as the fixed interest rate generally only applies for a limited period of time. In the unfortunate event of a loan default, the lending bank reserves the right to contact the third party of its choice for repayment. Most borrowers are not aware of this clause and find it disruptive when contacted by these third parties for the repayment of the fees. Particular attention should be paid to all “default cross” clauses that affect the fact that a failure in one agreement triggers a standard between another. These should not apply to on-demand facilities provided by the lender and should include thresholds defined accordingly.
A default can occur in different ways in a loan agreement. It can occur in cases where the borrower does not pay the agreed value and in cases where the borrower violates the positive or negative agreements of the agreement. A positive federal state requires the borrower to perform certain transactions, while a negative federal state requires the borrower to avoid certain transactions. A “cross-by-default” clause, related to the payment of the contractual value, is called “cross-payment default” and a “cross default related to the performance of other contractual obligations” is called “Covenant Cross-Default.” Borrowers: The definition of the borrower includes all group companies that require access to the loan, including revolving credits (flexible credits as opposed to a fixed amount repaid in increments) or the working capital component. This should also include all target companies acquired with the funds made available. Subsidiaries that need a provision may need to join the group of borrowers. If there is a reason why the affected companies cannot be parties to the agreement when they are executed – for example. B in the event of an acquisition by limited companies – prior approval from the bank would be required for them to be included in the agreement at a later date. If there are foreign companies in the group, it is worth asking whether they will have access to credit facilities or how.