Confirmation of Ability to Pay Debts in Relation to a Loan
Letter of Solvency
Our Loan Agreements are consistently some of our most popular Corporate
templates and are designed for use by a broad range of SME businesses. They
cover the necessary legal and practical considerations relevant to the
lending of small to medium sized amounts. To complement our current
portfolio of templates, we have added a Notice or Letter of Solvency
addressed to a lender and signed by the director(s) of the borrower
confirming the borrower’s solvency and ability to pay its debts in relation
to a loan.
The credit worthiness and financial health of a borrower will be of utmost
importance to a lender and forms the most important part of a lender’s
initial decision to lend when first evaluating a prospective borrower and
its capacity to make repayments under a loan.
This Solvency Notice aims to bridge the gap between a lender seeking
enforceable security for a loan and having no written comfort at all from a
borrower outside the loan agreement; which in effect means that the lender
must rely on its own due diligence as to the borrower’s ability to repay
the loan. In this template the borrower confirms to the lender that it is
solvent, able to repay its debts and will not be negatively impacted as a
result of entering into the loan. This can be a useful level of comfort for
any lender in addition to the information it has gathered from reviewing a
borrower’s annual accounts.
This Letter of Solvency is designed to work alongside our loan agreements
and particularly our long form loan agreement.
The contents of this Newsletter are for reference purposes only and do not constitute
legal advice. Independent legal advice should be sought in relation to any specific