Question 1

Is a term sheet binding?

Accepted Answer

It depends on the wording, governing law and provision being considered. Many term sheets state that the commercial principles are non-binding but keep confidentiality, exclusivity, costs or governing law provisions binding. Even before the lender is committed, the document may materially constrain later negotiations.

Question 2

When should lawyers become involved in discussions with the lender?

Accepted Answer

Before the term sheet is signed is usually the most useful point. The structure, security, covenants and funding conditions can then be corrected without reopening principles treated as agreed. Lawyers can join later, but some commercial options may already be limited.

Question 3

Why does the bank still require documents after the facility agreement is signed?

Accepted Answer

Signing and drawdown are separate stages. The agreement may make funding conditional on approvals, security, confirmations and representations that remain true on the drawdown date. The list should be reviewed early because some items depend on registries, valuers, insurers or other third parties.

Question 4

Does a parent guarantee mean that the parent must automatically pay any amount demanded?

Accepted Answer

The document must be reviewed before that can be answered. A suretyship, autonomous guarantee and indemnity operate differently. The limit, duration, demand conditions, available defences, corporate approvals and governing law all matter.

Question 5

What should we do if a financial covenant is likely to be breached?

Accepted Answer

First check the contractual formula and source data. If a breach remains likely, prepare the lender discussion before the testing or certificate date. A waiver or amendment should identify the precise breach and period that it covers.

Question 6

Can we refinance before the facility matures?

Accepted Answer

Usually only under the prepayment provisions of the agreement. Notice, potential costs, amounts due on the payment date and the security release process must be checked. The new drawdown and repayment of the existing facility are coordinated as one sequence.

Question 7

How long does it take to satisfy the conditions precedent?

Accepted Answer

It depends on the assets, approvals and third parties involved. Internal documents may be prepared quickly, while valuations, contractual consents, registrations or documents from another jurisdiction can take longer. A conditions tracker identifies what may hold up the proposed drawdown date.

Question 8

Can an unauthorised company provide financing or payment services?

Accepted Answer

The treatment depends on the activity. An isolated intercompany loan and lending carried on as a business are assessed differently, but neither the label nor frequency decides the classification on its own. Payment services may only be provided professionally within the statutory framework. The model, clients, funding source and flow of money should be reviewed before launch.