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Purchase Order Financing Agreement for United Arab Emirates

Purchase Order Financing Agreement Template for United Arab Emirates

A Purchase Order Financing Agreement governed by UAE law is a specialized financial instrument that enables businesses to obtain funding based on confirmed purchase orders from creditworthy buyers. This agreement, structured within the UAE's commercial and banking regulatory framework, outlines the terms and conditions under which a financial institution provides advance funding against purchase orders, typically ranging from 70-80% of the order value. The document incorporates specific UAE regulatory requirements, including Central Bank regulations and, where applicable, Sharia compliance principles, while detailing the rights, obligations, security arrangements, and operational procedures for all parties involved.

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What is a Purchase Order Financing Agreement?

The Purchase Order Financing Agreement is crucial for businesses operating in the UAE's dynamic trading environment that require working capital to fulfill their customers' orders. This document becomes relevant when a company has received purchase orders but lacks the immediate working capital to fulfill them. The agreement, governed by UAE law and banking regulations, establishes the framework for financial institutions to provide advance funding against these purchase orders. It includes comprehensive details about the financing mechanism, security requirements, compliance with UAE Central Bank regulations, and where applicable, Sharia principles. The document is particularly important in the UAE's context as a major global trading hub, where businesses frequently need efficient financing solutions to manage their trade cycle and maintain competitiveness in international markets.

What sections should be included in a Purchase Order Financing Agreement?

1. Parties: Identification of the Finance Provider and the Client (Purchase Order recipient)

2. Background: Context of the financing arrangement and brief description of the underlying business relationship

3. Definitions and Interpretation: Definitions of key terms used in the agreement and rules of interpretation

4. Facility and Purpose: Details of the financing facility, including amount, purpose, and scope

5. Conditions Precedent: Conditions that must be satisfied before the facility becomes available

6. Financing Mechanism: Process for requesting and providing financing against purchase orders

7. Fees and Charges: All applicable fees, charges, and profit rates

8. Representations and Warranties: Statements of fact and assurances given by the Client

9. Client Covenants: Ongoing obligations and commitments of the Client

10. Security and Collateral: Details of security arrangements and collateral requirements

11. Payment Mechanisms: Procedures for payments, collections, and settlements

12. Events of Default: Circumstances constituting default and consequences

13. Termination: Provisions for termination and its consequences

14. General Provisions: Standard legal provisions including notices, amendments, governing law

What sections are optional to include in a Purchase Order Financing Agreement?

1. Sharia Compliance: Required if the financing is to be Sharia-compliant, detailing the Islamic financing structure

2. Multi-currency Provisions: Required if financing can be provided in multiple currencies

3. Insurance: Required if specific insurance coverage is needed for the financed goods

4. Sub-participation: Required if the finance provider may sell down or syndicate the facility

5. Agency Provisions: Required if an agent is appointed to manage the facility

6. Electronic Trading Platform: Required if the financing is linked to a specific trading platform

7. Credit Insurance: Required if credit insurance is part of the structure

What schedules should be included in a Purchase Order Financing Agreement?

1. Facility Parameters: Detailed terms including limits, profit rates, fees, and tenure

2. Form of Purchase Order: Template or requirements for acceptable purchase orders

3. Conditions Precedent Documents: List of required documents and evidence

4. Security Documents: Forms of required security documents

5. Operational Procedures: Detailed procedures for requesting financing and making payments

6. Form of Financing Request: Template for requesting financing against specific purchase orders

7. Approved Buyers List: List of approved buyers whose purchase orders can be financed

8. Compliance Documents: KYC and other compliance requirements

Authors

Alex Denne

Head of Growth (Open Source Law) @ Ƶ | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Publisher

Ƶ

Document Type

Purchase Agreement

Cost

Free to use
Relevant legal definitions














































Clauses






































Relevant Industries

Manufacturing

Trading

Import/Export

Wholesale

Retail

Construction

Technology

Industrial Equipment

Automotive

Textiles

Electronics

Consumer Goods

Commodities

Relevant Teams

Legal

Finance

Treasury

Trade Finance

Risk Management

Compliance

Commercial

Credit

Procurement

Supply Chain

Corporate Banking

Relevant Roles

Chief Financial Officer

Finance Director

Treasury Manager

Trade Finance Manager

Commercial Director

Supply Chain Manager

Financial Controller

Credit Manager

Procurement Director

Legal Counsel

Risk Manager

Relationship Manager

Corporate Banking Officer

Trade Finance Officer

Compliance Officer

Industries








Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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