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Finance Agreement
I need a finance agreement for a loan between two parties, specifying a principal amount of IDR 500 million with an interest rate of 8% per annum, to be repaid over a period of 5 years with quarterly installments. The agreement should include clauses for early repayment, default penalties, and a clear outline of collateral requirements.
What is a Finance Agreement?
A Finance Agreement sets out the terms and conditions for lending money or providing credit between parties in Indonesia. It details how much money will be borrowed, the interest rate, repayment schedule, and any collateral being used as security. These agreements must comply with Indonesian Financial Services Authority (OJK) regulations and the Civil Code.
The document protects both lenders and borrowers by clearly stating their rights and obligations. Common types include business loans, consumer credit, equipment financing, and property mortgages. Indonesian law requires these agreements to be in writing and often needs notarization, especially for significant loan amounts or when involving registered assets as collateral.
When should you use a Finance Agreement?
Use a Finance Agreement anytime you need to borrow or lend money in Indonesia's business environment. This includes getting bank loans for business expansion, financing equipment purchases, or setting up payment plans with suppliers. It's especially important when the transaction involves significant amounts or when OJK regulations require formal documentation.
The agreement becomes essential before transferring any funds or starting credit arrangements. For example, when buying commercial property, leasing industrial equipment, or establishing trade credit with new business partners. Indonesian law mandates written documentation for financial obligations, and having a proper agreement helps prevent disputes and ensures smoother enforcement if problems arise.
What are the different types of Finance Agreement?
- Lending Loan Agreement: Standard format for financial institutions lending to businesses, includes detailed security and compliance requirements
- Loan Agreement Between Individuals: Simplified structure for personal loans, focusing on basic terms and repayment schedules
- Standard Loan Agreement: Comprehensive template suitable for most business lending situations, includes all essential OJK-compliant provisions
- Bridge Loan Agreement: Short-term financing structure with specific terms for temporary funding needs
- Simple Loan Repayment Agreement: Focused specifically on repayment terms and schedules for straightforward loans
Who should typically use a Finance Agreement?
- Banks and Financial Institutions: Primary lenders who draft and enforce Finance Agreements, ensuring compliance with OJK regulations and their internal policies
- Corporate Borrowers: Businesses seeking capital for expansion, equipment, or working capital needs
- Individual Borrowers: Private persons obtaining personal loans, mortgages, or consumer financing
- Legal Counsel: Internal or external lawyers who review and customize agreement terms to protect their clients' interests
- Notaries: Required to authenticate significant Finance Agreements under Indonesian law
- Guarantors: Third parties who provide additional security by guaranteeing the borrower's obligations
How do you write a Finance Agreement?
- Party Details: Gather complete legal names, addresses, and registration numbers of all borrowers, lenders, and guarantors
- Loan Specifics: Document the principal amount, interest rate, payment schedule, and loan duration
- Collateral Information: List all assets being used as security, including their current market value and ownership details
- Business Documents: Collect company registration, financial statements, and tax records for corporate borrowers
- Regulatory Compliance: Check OJK requirements for your specific type of financing
- Documentation: Use our platform to generate a compliant Finance Agreement template, customized to your specific needs
- Validation: Review all terms with involved parties before finalizing the agreement
What should be included in a Finance Agreement?
- Identification Section: Complete legal names and details of all parties, including registration numbers for corporate entities
- Loan Terms: Principal amount, interest rate, payment schedule, and duration clearly stated in Rupiah
- Security Provisions: Detailed description of collateral and guarantees, including valuation and enforcement rights
- Default Clauses: Specific events of default and consequences under Indonesian Civil Code
- Payment Terms: Clear repayment schedule, methods, and late payment penalties
- Governing Law: Express statement of Indonesian law application and jurisdiction
- Execution Block: Proper signature sections, including notary requirements when applicable
- Force Majeure: Standard provisions aligned with Indonesian legal principles
What's the difference between a Finance Agreement and a Bond Issuance Agreement?
A Finance Agreement is often confused with a Bond Issuance Agreement, but they serve distinct purposes in Indonesian financial law. While both involve raising capital, their structures and legal requirements differ significantly.
- Purpose and Scope: Finance Agreements primarily handle direct lending between parties, while Bond Issuance Agreements govern the creation and sale of debt securities to multiple investors
- Regulatory Framework: Finance Agreements follow OJK lending regulations and Civil Code provisions, whereas Bond Issuances must comply with capital market laws and IDX requirements
- Party Structure: Finance Agreements typically involve two main parties (lender and borrower), while Bond Issuances involve multiple stakeholders including trustees, underwriters, and numerous bondholders
- Transferability: Bond Issuance Agreements create freely transferable securities, while Finance Agreements usually restrict loan transfer rights
- Documentation: Bond issuances require more extensive documentation, including prospectus and registration statements
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