Facility Agreement Vs Letter of Offer

Facility Agreement vs Letter of Offer: What`s the Difference?

When it comes to borrowing money from a financial institution, there are often two documents clients encounter: the facility agreement and the letter of offer. While they may seem similar at first glance, there are subtle differences between the two that can have a significant impact on a borrower`s obligations and rights. In this article, we`ll take a closer look at these documents and what sets them apart.

Overview of a Facility Agreement

A facility agreement is a legal document that establishes the terms and conditions of a loan between a borrower and a lender. This agreement outlines the amount of money being borrowed, the interest rate, repayment schedule, and any additional fees or charges that may be incurred. The facility agreement also sets out the contractual relationship between the borrower and the lender, covering issues such as default, early repayment, and termination.

One of the key features of a facility agreement is its flexibility. This type of agreement can be tailored to meet the specific needs of each borrower, allowing them to choose the loan amount, repayment period, and other terms that best suit their financial situation. This flexibility is a valuable tool for borrowers, as it allows them to design a loan that fits their unique circumstances.

Overview of a Letter of Offer

A letter of offer, on the other hand, is a document that describes the terms and conditions of a loan offered by a financial institution. This letter sets out the basic terms of the loan, such as the loan amount, interest rate, repayment schedule, and fees. The letter of offer also outlines any collateral or security required by the lender, along with the conditions for using that collateral.

Unlike a facility agreement, a letter of offer is typically a non-binding document. This means that while it outlines the terms of a proposed loan, it does not create a legal obligation between the borrower and the lender. Instead, the letter of offer is an invitation for the borrower to apply for the loan on the basis of the terms set out in the letter.

Key Differences Between a Facility Agreement and a Letter of Offer

While both a facility agreement and a letter of offer deal with loans, there are several key differences between these two documents. These include:

Legal Obligation: A facility agreement creates a legally binding contract between the borrower and the lender. In contrast, a letter of offer is usually non-binding and does not create legal obligations.

Flexibility: A facility agreement is designed to be flexible, with terms and conditions that can be customized to meet the specific needs of the borrower. A letter of offer, on the other hand, typically presents a set of standard terms that the borrower can choose to accept or not.

Customization: A facility agreement allows the borrower to negotiate specific terms, such as repayment schedules, interest rates, and fees. A letter of offer, by contrast, generally presents a standardized set of terms and conditions that the borrower can accept or reject.


When choosing between a facility agreement and a letter of offer, borrowers should consider their specific needs and financial situation. While a letter of offer may be a good starting point for borrowers looking to secure a loan, a facility agreement offers greater flexibility and customization options. Ultimately, whichever document a borrower chooses, they should make sure to read the terms carefully and fully understand their obligations and rights before signing.

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