Finance agreements can be extensive and difficult to understand; they are often based on English law documents and standards, even though the UK has a different legal system and contract tradition than Norway. Borrowers need to understand the terms they accept when receiving a loan from one or more lenders. Lenders need to understand the protection the finance agreements offer them and how and when they can enforce their rights. Simply Finance is not a statement that finance is simple, but a series of newsletters explaining financing concepts, terms and definitions in a simple way. It is our attempt to demystify the legal finance business and contribute to increased understanding for everyone involved in financing.
Term Sheets in Finance Agreements
A term sheet is often prepared as the basis for a financing arrangement and outlines the main terms and conditions for a financing agreement between a borrower and a lender(s). Typically, this includes the type of financing or facility (term loan, revolving credit facility, debt instruments), loan amount, tenor, interest, security, repayment and prepayment, covenants, conditions precedent, and events of default.
A promissory note is a debt instrument that contains a promise made by a debtor to pay a creditor. Certain requirements must be satisfied for a debt instrument to be considered a promissory note under Norwegian law, i.e.: (i) being made in writing and signed by the debtor, (ii) including an unconditional obligation for the debtor to pay when due, and (iii) the obligation must be a specified cash payment obligation.