Establishing secure connection…Loading editor…Preparing document…

Financing Clause Agreement

This template is fully customizable. Edit the text, fill out the fields, and send it for signature. Give it a try!

FINANCING CLAUSE AGREEMENT

This Financing Clause Agreement ("Agreement") is entered into as of by and between Lender Name: with principal address at and Borrower Name: with principal address at (each a "Party" and collectively the "Parties").

RECITALS

WHEREAS, the Parties have entered into or intend to enter into a purchase agreement dated concerning the transaction for the property or asset described as (the "Transaction");

WHEREAS, Borrower's ability to consummate the Transaction is subject to obtaining debt financing on terms acceptable to Borrower in its sole discretion, and Lender has indicated an intent to consider making such financing available under the terms set forth herein; and

WHEREAS, the Parties wish to set forth the obligations, conditions, time periods and remedies with respect to any financing commitment or financing contingency affecting the Transaction.

NOW, THEREFORE, in consideration of the mutual covenants and promises set forth below, the Parties agree as follows:

1. DEFINITIONS

1.1 "Commitment Letter" means a written, binding commitment from Lender (or an identified lender acceptable to Borrower) setting forth the principal terms and conditions of the loan to be provided in connection with the Transaction, including the principal amount, interest rate, term, amortization, prepayment provisions, collateral, covenants and conditions precedent.

1.2 "Financing Contingency" means Borrower's right to terminate or renegotiate the Transaction if Borrower does not receive a Commitment Letter on the terms set forth in Section 2 within the Financing Period.

2. LENDER OBLIGATIONS

2.1 Commitment Terms. Subject to the conditions set forth in this Agreement, Lender shall use commercially reasonable efforts to provide Borrower with a written Commitment Letter no later than . The Commitment Letter shall specify a loan amount of , an initial interest rate of , loan type , and customary loan documentation required to close the financing.

2.2 Conditions Precedent to Lender's Obligation. Lender's obligation to deliver a Commitment Letter is subject to (a) Borrower's delivery of accurate and complete financial and legal information as reasonably requested by Lender; (b) satisfactory appraisal, environmental review and title review; and (c) Lender's internal credit approval and underwriting, provided that Lender shall communicate any conditions in writing and in good faith.

2.3 No Guarantee of Closing. Except as expressly set forth in a signed Commitment Letter, nothing in this Agreement shall obligate Lender to fund any loan or to accept terms other than those contained in a final Commitment Letter.

3. BORROWER OBLIGATIONS

3.1 Cooperation. Borrower shall cooperate in good faith with Lender's reasonable requests for information and documentation, shall make available authorized representatives for discussions, and shall execute customary loan-related documents prior to Closing in a commercially reasonable timeframe.

3.2 Good Faith Efforts. Borrower shall use reasonable commercial efforts to obtain the Commitment Letter and to satisfy any obligations or conditions required for closing the financing within the Financing Period described in Section 4.

4. FINANCING PERIOD; TERMINATION

4.1 Financing Period. The period during which Borrower may obtain a Commitment Letter shall commence on the Effective Date and continue for a period of days (the "Financing Period"), unless extended in writing by mutual agreement.

4.2 Termination for Failure to Obtain Financing. If Borrower has not received a Commitment Letter acceptable to Borrower by the expiration of the Financing Period, Borrower may terminate the Transaction by delivering written notice to Lender, and upon such termination neither Party shall have further obligations under this Agreement except for those provisions that by their terms survive termination.

4.3 Extension. Borrower may request, and Lender may grant in its discretion, a single extension of the Financing Period for an additional period not to exceed days upon written notice; any such extension shall not create an obligation on Lender to change the terms offered.

5. CONDITIONS TO CLOSING

5.1 Conditions. Borrower's obligation to close and Lender's funding obligation shall be conditioned upon satisfaction or waiver of customary conditions precedent, including without limitation: (a) delivery of a final executed Commitment Letter; (b) absence of any material adverse change to Borrower's financial condition or to the Transaction; (c) receipt of required approvals and consents; and (d) completion of all due diligence acceptable to the party requesting such due diligence.

5.2 Delivery of Commitment Letter. The Commitment Letter shall be delivered in writing to Borrower at the address for notices provided in Section 8 and shall specify a date by which the loan shall be funded (the "Funding Date").

6. COSTS, FEES AND EXPENSES

Unless otherwise agreed in a Commitment Letter, each Party shall bear its own fees and expenses incurred in connection with obtaining or reviewing financing, including legal, appraisal and title fees. If a Commitment Letter provides for a fee payable by Borrower to Lender upon issuance, such fee shall be set forth in the Commitment Letter.

7. REPRESENTATIONS AND WARRANTIES

7.1 Each Party represents and warrants that: (a) it is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization; (b) it has full power and authority to enter into and perform this Agreement; and (c) the execution and delivery of this Agreement and the performance of its obligations hereunder have been duly authorized by all necessary action.

8. NOTICES

All notices, demands or other communications required or permitted under this Agreement shall be in writing and delivered to the addresses below. Notices shall be deemed given when personally delivered, sent by nationally recognized overnight courier, or three (3) business days after deposit in the U.S. mail, postage prepaid, certified or registered.

9. AMENDMENTS; WAIVER

This Agreement may be amended only by a written instrument executed by both Parties. No failure or delay by any Party in exercising any right shall operate as a waiver, nor shall any single or partial exercise of any right preclude other or further exercise of that right.

10. INDEMNIFICATION

Each Party shall indemnify, defend and hold harmless the other Party from and against any third-party claims, losses or liabilities arising from the indemnifying Party's breach of its representations, warranties or covenants under this Agreement, except to the extent such claims arise from the non-indemnified Party's gross negligence or willful misconduct.

11. GOVERNING LAW

This Agreement shall be governed by and construed in accordance with the laws of the state of without regard to its conflict of laws principles.

12. ENTIRE AGREEMENT

This Agreement, together with any Commitment Letter duly executed in connection herewith, constitutes the entire agreement between the Parties with respect to the subject matter hereof and supersedes all prior negotiations, representations and agreements, whether written or oral.

13. SEVERABILITY

If any provision of this Agreement is held invalid or unenforceable by a court of competent jurisdiction, the remaining provisions shall remain in full force and effect and the Parties shall negotiate in good faith to replace the invalid provision with a valid provision that most nearly effects the Parties' original intent.

14. COUNTERPARTS; ELECTRONIC SIGNATURES

This Agreement may be executed in counterparts, each of which shall be an original and all of which together shall constitute one instrument. The Parties agree that facsimile, scanned or electronic signatures shall be binding for all purposes.

15. MISCELLANEOUS

15.1 Remedies. Except as otherwise provided herein, rights and remedies available under this Agreement are cumulative and in addition to any other rights available at law or in equity, including specific performance where appropriate.

15.2 Assignment. Neither Party may assign its rights or obligations under this Agreement without the prior written consent of the other Party, which consent shall not be unreasonably withheld, except that Lender may assign its rights to an affiliate or to a purchaser of loans.

ACKNOWLEDGMENT

Each Party acknowledges that it has read this Agreement, had an opportunity to seek independent legal counsel, and understands and accepts the terms and conditions set forth herein.

Lender

Printed Name:

By:

Date:

Borrower

Printed Name:

By:

Date:

Enter text✕
Prepare your document for signing right on this page
  • 01 Edit the text and complete the fields
  • 02 Click Sign Now and on the next screen add recipients and signature fields in SignNow
  • 03 Start your free trial to sign and send your doc
Sign Now

What the Financing Clause Agreement Is and When It Matters

A Financing Clause Agreement sets out how a party will obtain, use, or secure external financing in connection with a primary contract or transaction. It defines conditions precedent, lender approval requirements, loan terms, security interests, assignment rights, and remedies for failure to obtain financing. Common in real estate purchases, asset sales, and business acquisitions, the clause allocates risk between buyer and seller and guides closing steps when financing is the gateway to performance.

Why a Clear Financing Clause Reduces Closing Risk

A well-drafted Financing Clause reduces ambiguity about who bears financing risk, shortens lender review cycles, and preserves remedies if financing falls through. It helps parties set firm deadlines, define acceptable loan terms, and protect collateral and deposit interests.

Why a Clear Financing Clause Reduces Closing Risk

Who Commonly Prepares and Signs Financing Clauses

Several parties interact with financing clauses at different stages of a transaction.

  • Lenders and loan officers reviewing approval conditions and collateral requirements.
  • Buyers or borrowers negotiating loan term limits, interest, and contingencies.
  • Sellers, escrow agents, and closing attorneys coordinating deadlines and remedies.

The clause is typically drafted by counsel or by a contracting party and finalized prior to closing to prevent last-minute disputes.

Core Elements to Include in a Professional Financing Clause

Include clear, unambiguous provisions for each functional area so lenders, buyers, and sellers share expectations and obligations.

Financing Condition

Specify whether financing is a condition precedent, a covenant, or a contingency and state acceptance criteria including commitment letter terms and required approvals.

Loan Terms

Define maximum interest rate, amortization, term, fees, prepayment penalties, and any permissible adjustments to ensure the financing meets transaction needs.

Security and Collateral

Describe liens, UCC-1 filing responsibilities, priority expectations, and which party bears recording or release costs for secured interests.

Assignment Rights

State whether the borrower or lender may assign the financing agreement and whether counterparty consent is required for assignment or substitution.

Lender Approval

Set a deadline for lender approval, define acceptable lender qualifications, and describe required documentation such as commitment letters and appraisal reports.

Default Remedies

Allocate remedies for failure to obtain financing, including deposit forfeiture, cure periods, termination rights, and indemnity obligations.

Step-by-Step: How to Complete the Financing Clause

Follow these sequential tasks to draft, review, and finalize the financing clause efficiently.

  • 01
    Collect Documents: Gather credit docs, commitment letters, and appraisals.
  • 02
    Draft Clause: Insert clear conditions, dates, and acceptable loan terms.
  • 03
    Lender Review: Send clause for lender approval and required exhibits.
  • 04
    Sign and Close: Obtain signatures and record security interests as required.

How the Financing Clause Fits into the Transaction Workflow

The financing clause interacts with contract drafting, lender diligence, and closing processes—each step affects timelines and deliverables.

  • Drafting: Draft clause and attach required lender exhibits.
  • Disclosure: Share clause with lender and counterparty for review.
  • Commitment: Receive conditional or unconditional loan commitment.
  • Closing: Satisfy conditions and execute final documents.

Online Workflow Settings for Digital Completion

Configure a consistent online workflow so parties receive, authenticate, and sign documents in the correct sequence.

Field Configuration
Signer Authentication Email + SMS code or KBA for higher assurance
Template Reuse Save standard clause as a reusable template
Bulk Send Use bulk send for many similar closings
Audit Trail Enable timestamps, IP logging, and certificate generation

Technical Requirements for eSigning and eFiling

Choose a platform that supports PDF/DOCX, detailed audit trails, and configurable authentication to meet lender and legal standards.

  • File Types: PDF, DOCX, and HTML supported
  • Integrations: Connects to CRM, NetSuite, Google Workspace
  • Security: TLS in transit; AES-256 at rest

Ensure the chosen service offers ESIGN/UETA compliance, optional HIPAA BAAs if needed, and an exportable audit trail to satisfy lender and recorder requirements.

Key Deadlines to Build Into the Financing Clause

Explicit dates and countdowns reduce disputes and provide clear milestones for lender and counterparty performance.

Financing Contingency Deadline:

Date by which borrower must deliver a loan commitment.

Lender Commitment Date:

Target date for unconditional lender approval.

Appraisal and Inspection Deadline:

Date to complete property valuation and inspections.

Closing Date:

Date when funds are disbursed and documents recorded.

Cure Period:

Limited time for remedy before contract termination.

Milestones: From Draft to Funding

A sequential view of the primary milestones clarifies responsibilities and escalations as deadlines approach.

01

Drafting and Negotiation

Parties draft clause and negotiate acceptable loan parameters.

02

Lender Diligence

Lender reviews documentation, appraisal, and borrower credit.

03

Commitment Issuance

Lender issues conditional or unconditional commitment to borrower.

04

Funding and Recording

Loan funds, and any required security interests are recorded.

Common Preparation Errors to Avoid

  • Using vague acceptance criteria for financing, which leads to disputes over whether loan terms are 'acceptable' to a party.
  • Failing to specify deadlines and cure periods, resulting in unclear termination rights or lost deposits.
  • Omitting precise lender identity or branch details, which can impede collateral perfection and communication with servicers.
  • Neglecting to require commitment letters or appraisal standards, creating grounds for lender rejection later in the process.

Consequences of an Incorrect or Incomplete Financing Clause

Transaction Delay: Loss of closing date
Deposit Forfeiture: Buyer may lose deposit
Breach Liability: Damages and indemnity exposure
Security Interest Risk: Failure to perfect liens
Foreclosure Exposure: Lender enforcement on default
Regulatory Risk: Noncompliance with lender rules

Security and Compliance Considerations for Electronic Completion

Encryption in Transit: TLS 1.2/1.3
Encryption at Rest: AES-256
Audit Trail: Comprehensive timestamps and IP logs
Major Certifications: SOC 2 Type II, ISO 27001
Regulatory Compliance: ESIGN and UETA adherence
Healthcare Support: HIPAA available with BAA

How a Financing Clause Compares to Related Documents

Compare common instruments to determine whether to include financing terms in the main contract or use a separate document.

Criteria Financing Clause Promissory Note
Purpose allocate risk evidence of debt
Security may reference security often creates security
Recording rare common (ucc-1 or deed)
Typical Parties buyer/seller borrower/lender

eSignature Vendor Snapshot for Financing Clause Workflows

Pricing and core feature differences matter when choosing an eSignature provider for loan documents and secure workflows.

signNow DocuSign Adobe Sign PandaDoc HelloSign
Starting Price $8/user/mo $15/user/mo $14/user/mo $19/user/mo $15/user/mo
Free Trial 7-day trial Trial available Trial available Trial available Trial available
Bulk Send Yes Yes Yes Yes Limited
Audit Trail Yes Yes Yes Yes Yes
HIPAA Compliant Yes Yes Yes No No

Practical Examples of Financing Clause Use

Two concise scenarios illustrate how clauses are structured and applied in practice.

Residential Purchase Scenario

A buyer includes a financing contingency tied to a conventional mortgage commitment within 30 days.

  • Buyer must deliver a written commitment letter.
  • The clause preserved the buyer's deposit when the lender declined due to appraisal; seller relisted without liability after the cure period expired, demonstrating clear timelines limit dispute risk.

Asset Sale with Seller Financing

Seller agrees to subordinate part of its purchase price to lender approval of a commercial loan.

  • Lender approval is required in writing.
  • The clause required presentation of lender commitment and perfection of security interest; where lender requested additional collateral, parties negotiated an amendment rather than terminate the sale.

Who Signs and What Authority They Need

Loan Officer

A loan officer or authorized lender signatory completes commitment confirmations and accepts terms on behalf of the lending institution; their signature should be accompanied by printed name, title, and corporate capacity to avoid later challenges.

Authorized Signer

A buyer or corporate officer signing for the purchaser must show that they have authority to bind the entity; use a board resolution or power of attorney when required to demonstrate signing authority.

Frequently Asked Questions About Financing Clause Agreements

Answers to common questions about enforceability, e-signatures, lender review, and modification of financing clauses.


Need help? Contact support

be ready to get more
Join over 28 million airSlate SignNow users
Sign Now
Company
Forms
Pricing
Resources
Knowledge base
Other Products
© 2026 airSlate Inc. All rights reserved.