Finance Agreement

Prepare a water-tight finance agreement to have security & peace of mind in the future. It helps you avoid misunderstandings or disputes. It keeps the funding process highly transparent.

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Finance Agreement

A finance agreement is a document, which outlines how a particular business project or plan is to be properly financed. It typically takes the form of a contract between two parties; the lender (the financer) and a borrower (the business).

Therefore, a finance agreement or financing agreement can be necessary to make sure that the business project is properly funded along the way without any obstacles.

Finance agreements may cover many, many different forms of business activities. Any project that involves outside funding will require a finance agreement. Most financing arrangements will permit the borrower to repay debt using the profits arising from the project.

For example, a lender may enter into a bond with a company for the construction of a movie theatre. The company can then use the money generated from ticket sales to repay the money, which was borrowed.

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Benefits of Finance Agreements

  • Provides proof of what has been decided between you and the other party.
  • It helps to avoid future misunderstandings or disputes by making the agreement clear right from the start.
  • Gives you security and peace of mind by having on paper the terms of the agreement that do not change the terms
  • Reduce the risk of a dispute over payments, liabilities, and timeframes for the service to be performed under the contract
  • Sets out how to resolve disputes
  • Specifies how one party can terminate the contract before the work is complete

Checklist Requirements of Finance Agreements

  • What will be included in a contract would depend on the form of agreement and its complexity.
  • A contract needs two essential components for it to be legally binding:
    • An agreement, and
    • A consideration.
  • An assortment of provisions added to the legality of a contract lies within the agreement and consideration. These include the offer, terms, performance, terms, obligations, payment clauses, liability, and contract default or infringement.
  • For an agreement to be binding, it needs to have some form of consideration. That means that consideration or something of value must be given to all parties involved. Otherwise, it is considered not a contract but a gift.

Typically, you want to make sure you cover the following elements in a contract:

  • Obligations and responsibilities: What must be done by each party under the contract.
  • Performance: How well each party fulfils the terms of the contract.
  • Payment Terms: The details of how the contractual payments will be made.
  • Liabilities: How to handle liabilities and responsibilities when a problem arises.
  • Contract breach: What happens if either party fails to fulfil its obligations.
  • Although it is not legally required, there should also be several provisions known as 'boilerplate' provisions in a written agreement. Including:
    • Entire Agreement Clause: Specifies what is written in the contract is exactly what is agreed on.
    • Force Majeure Clause: States that if something happens outside of either party's control, such as a fire or earthquake or some rare event that nobody is responsible for, then the contract is no longer valid.
    • Arbitration or Mediation Clause: This dictates how disputes will be handled, either by a third-party independent arbitration or mediator.

The Film Investor Agreement:

The Film Investor Agreement allows you to show what you are doing about film funding. Investors place their trust not only in you as a filmmaker but also as a business person. It is important to present a professional Film Investor Agreement to your film investor outlining the basic conditions designed to protect both their money and your film.

These investors know that the chances of earning a profit are slim to none, yet they still want assurance that their money is being handled in the best possible way, given the risky nature of the film business.

What are the steps involved in drafting a Finance Agreement?

A finance agreement is a contract between the borrower and the creditor. As such, in the event of a violation, it is subject to specific contract laws relating to existence, development, and compliance.

Although each financing agreement can vary depending on individual needs, there should be a specific financing agreement that includes:

  • Names and contact information for all the parties involved (may include business entities in addition to individuals)
  • A general statement of the nature of the business or project that needs funding
  • The amount to be borrowed
  • Terms with respect to the distribution of the funds (whether the loan will be paid in a lump sum or via monthly distributions)
  • Terms of repayment for the funds
  • How the money is to be used
  • How the parties must solve the disputes if a breach has risen, for example, including a separate clause requiring arbitration instead of a lawsuit.

Financing arrangements can also be very complicated, even for projects which seem straightforward. To prevent conflicts, they need a solid business plan, as well as foresight. In most cases, a lawyer is needed for help with contract drafting, especially when considering financing a small business.

Finance agreements are not enforceable if they have been established under situations of duress or fraud, or if they require financing for an unlawful project. When a finance agreement has been infringed, the contract holder may often file a lawsuit for relief. Common remedies include an award for damages to compensate for the losses to the injured party.

Finance Agreement clauses:

Loan amount:

The lender promises to give a certain amount to the borrower and the borrower promises to repay this principal amount to the lender.


In this clause, the said principal amount will be repaid in full on the decided date of the parties.


In a case, where a borrower defaults in his performance, the lender may declare due payment and the payable principal amount owed under this agreement at the time.

Governing law:

This agreement will abide and be governed by the corresponding laws with respect to this agreement.


The borrower shall be responsible for all charges, losses, and expenditures incurred, including, without limitation, the lender's full legal costs, as a result of any default on the part of the borrower, and these costs shall be added to the principal that is outstanding and shall be due and payable to the lender by the borrower, immediately, upon the lender 's request.

Binding effect:

The contract will pass to the benefit of the borrower and lender, and will be binding on the respective heirs, executors, managers, successors and approved assignments. The creditor waives payment delivery, notification of non-payment, appeal, and a notice of appeal.


A written instrument, executed by both the parties can modify or amend the agreement.


The clauses and statements in this agreement are meant to be read and understood independently of each other. If any term, covenant, condition or provision of this agreement is held invalid, void or unenforceable by a court of competent jurisdiction, the parties intend that such provision shall be reduced by the court only to the extent that that court considers it necessary to make the provision reasonable and enforceable and that the remainder of the provisions of this agreement shall not be affected in any way.

General provisions:

Headings have been included solely for the parties’ convenience and are not to be considered in the singular, when interpreting the terms of the agreement. The same applies to the plural and vice versa.

Entire agreement:

This agreement constitutes in its entirety between the parties involved, with no further conditions, either verbally or otherwise, are available.

Steps to prepare the Finance Agreement with Vakilsearch

  • Step 1: Our platform connects you to highly rated lawyers.
  • Step 2: The first draft will be shared with you in four days.
  • Step 3: Two rounds of iterations at no extra cost.

Documents required:

  • Application Form: Complete the loan application form along with one passport size photograph
  • Identity Proof of Applicant: Copy of Passport, PAN card copy, Voter’s identity card, Driving license, and MAPIN card.
  • Proof of Residence: Telephone Bill/ Lease agreement/Ration card/ Electricity Bill/ Passport/Trade license /Sales Tax certificate.
  • Age proof: Copy of Passport, Photo PAN card, Voter’s identity card.
  • Financial Documents: Copies of IT returns for the last two years, together with the latest six-month bank statements and P & L and a Chartered Accountant-audited balance sheet for the last two years.

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