The Business Loan Guarantee agreement is a crucial document in Indian commercial lending, typically used when a lender requires additional security beyond the borrower's primary obligations. This document, governed by Indian law, establishes a three-way relationship between the lender, borrower, and guarantor, where the guarantor commits to fulfill the borrower's payment obligations if the borrower defaults. The agreement becomes particularly important in corporate and SME lending scenarios, where lenders seek to mitigate credit risk. It includes comprehensive provisions addressing the nature and extent of the guarantee, enforcement mechanisms, and the rights and obligations of all parties involved, all within the framework of Indian contract and banking laws.
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1. Parties: Identifies the Lender, Borrower, and Guarantor(s)
2. Background: Explains the context of the loan agreement and the purpose of the guarantee
3. Definitions and Interpretation: Defines key terms used in the agreement and rules for interpretation
4. Guarantee and Indemnity: Core section establishing the guarantee obligations and indemnification provisions
5. Extent and Limits of Guarantee: Specifies the maximum amount guaranteed and any limitations
6. Nature of Guarantee: Establishes that the guarantee is continuing, irrevocable, and unconditional
7. Guarantor's Representations and Warranties: Statements of fact and assurances given by the guarantor
8. Guarantor's Covenants: Ongoing obligations and commitments of the guarantor
9. Demand and Payment: Procedures for making demands under the guarantee and payment requirements
10. Interest and Costs: Provisions for interest on overdue amounts and recovery of costs
11. Rights of the Lender: Lender's enforcement rights and remedies
12. Preservation of Rights: Provisions ensuring guarantee remains valid despite changes to underlying loan
13. Notices: Communication procedures and contact details
14. Governing Law and Jurisdiction: Specifies Indian law as governing law and jurisdiction for disputes
15. Execution: Signature blocks and execution formalities
1. Security: Include when guarantee is backed by specific assets or security
2. Multiple Guarantors: Include when there are multiple guarantors to define joint and several liability
3. Assignment and Transfer: Include when parties want to allow for transfer of guarantee rights
4. Counter-Indemnity: Include when guarantor requires indemnity from the borrower
5. Financial Covenants: Include when guarantor must maintain specific financial metrics
6. Corporate Authorizations: Include when guarantor is a company requiring specific authorization provisions
7. Force Majeure: Include when parties want specific provisions for unforeseen circumstances
8. Guarantee Commission: Include when guarantor charges a fee for providing the guarantee
1. Schedule 1 - Loan Agreement Details: Details of the underlying loan agreement being guaranteed
2. Schedule 2 - Guarantor Information: Detailed information about the guarantor including financial statements
3. Schedule 3 - Security Details: Details of any security provided under the guarantee
4. Schedule 4 - Form of Demand: Standard form for making demands under the guarantee
5. Schedule 5 - Corporate Authorizations: Copies of relevant board resolutions and authorizations
6. Appendix A - Compliance Certificate: Template for periodic compliance certification by guarantor
7. Appendix B - Notice Details: Detailed contact information for all parties for notices
Relevant legal definitions
Clauses
Relevant Industries
Banking
Financial Services
Corporate Lending
Small and Medium Enterprises
Manufacturing
Real Estate
Retail
Technology
Infrastructure
Trading
Relevant Teams
Legal
Finance
Credit Risk
Compliance
Corporate Banking
Commercial Banking
Treasury
Operations
Documentation
Underwriting
Relevant Roles
Chief Financial Officer
Finance Director
Legal Counsel
Corporate Lawyer
Credit Manager
Risk Manager
Loan Officer
Relationship Manager
Company Secretary
Business Owner
Managing Director
Finance Manager
Compliance Officer
Treasury Manager
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