AI Generated American Line of Credit Agreement
PDF & Word - 2026 Updated

This Line of Credit Agreement is entered into as of January 15, 2024 by and between John A. Smith, an individual (the "Borrower"), and ABC Financial Services LLC, a limited liability company organized under the laws of the State of New York (the "Lender").

The Borrower is an individual with a principal place of business and residence at 123 Main Street, New York, NY 10001.

The Borrower and the Lender have no existing relationship or prior transactions.

The purpose of this Agreement is to establish a line of credit facility to finance short-term working capital needs for inventory purchases and operational expenses.

In this Agreement the term Borrower means John A. Smith, an individual.

In this Agreement the term Lender means ABC Financial Services LLC, a New York limited liability company.

In this Agreement the term Business Day means any day other than a Saturday, Sunday, or a day on which banks in New York, New York are authorized or required by law to close.

In this Agreement the term Line of Credit means the revolving credit facility established under this Agreement in the maximum principal amount of $50,000.

In this Agreement the term Advance means any disbursement of funds made by the Lender to the Borrower under the Line of Credit.

In this Agreement the term Maturity Date means January 15, 2025.

In this Agreement the term Collateral means all assets of the Borrower in which the Lender is granted a security interest pursuant to this Agreement and in accordance with Article 9 of the Uniform Commercial Code as in effect in the State of New York.

In this Agreement the term Promissory Note means the promissory note substantially in the form attached as Exhibit A hereto, executed by the Borrower in favor of the Lender to evidence each Advance.

In this Agreement the term UCC means the Uniform Commercial Code as in effect from time to time in the State of New York.

The Lender hereby establishes a Line of Credit in favor of the Borrower in the maximum principal amount of $50,000.00 USD.

The primary purpose of the Line of Credit is to finance short-term working capital needs for inventory purchases and operational expenses.

The maximum amount available under the Line of Credit shall not exceed $50,000.00 USD at any time.

The Line of Credit shall be a revolving facility allowing the Borrower to borrow, repay, and re-borrow Advances subject to the terms and conditions of this Agreement.

The effective date of this Line of Credit Agreement is January 15, 2024.

The availability period for Advances under the Line of Credit shall commence on January 15, 2024 and shall end on January 15, 2025.

The Line of Credit facility shall expire on the Maturity Date unless renewed in accordance with Section 4.4.

The parties may renew the Line of Credit facility upon mutual written agreement executed no later than thirty days prior to the expiration date.

Advances may first be requested under the Line of Credit on or after January 15, 2024.

All obligations under this Agreement shall be repaid in full on the Maturity Date of January 15, 2025.

The Borrower shall request Advances by submitting a written request to the Lender specifying the amount and purpose of the Advance.

The Borrower, John A. Smith, shall be the only person authorized to request Advances on behalf of the Borrower.

Each Advance shall be in a minimum amount of $1,000 USD.

The Borrower shall provide the Lender with one Business Day prior written notice before any Advance can be made.

The Borrower may request multiple Advances under the Line of Credit before any repayment is required subject to the availability of the Line of Credit and satisfaction of all conditions precedent.

The Lender shall make each Advance by wire transfer to the Borrower's designated bank account.

The Borrower shall submit all Advance requests by electronic mail to the Lender at the address specified in the Notices section of this Agreement.

The Lender shall not be obligated to fund any Advance unless all conditions precedent set forth in Section 11 of this Agreement have been satisfied, including execution and delivery of the Promissory Note as provided in Section 11.13.

Interest shall accrue on each Advance at a fixed annual rate of 5.5 percent, calculated daily on the basis of a 365-day year and actual days elapsed.

Interest shall be calculated on the basis of a 365-day year and the actual number of days elapsed.

Interest shall begin to accrue on Advances as of the date each Advance is made on or after the effective date of January 15, 2024.

Upon the occurrence of an Event of Default the interest rate applicable to the entire outstanding balance shall increase to the lesser of (i) 8.5 percent per annum or (ii) the maximum rate permitted under applicable New York usury laws.

Default interest shall apply to the entire outstanding balance until the Event of Default is cured or the obligations are paid in full. Interest shall not be compounded.

All interest rates and fees under this Agreement comply with New York usury laws, including NY Penal Law \§ 190.40 and General Obligations Law, and shall be automatically reduced to the maximum permitted rate if any overcharge occurs.

Interest payments shall be due on the 15th day of each month commencing on February 15, 2024.

Principal payments shall be due on the last day of each month commencing on January 31, 2024, with the entire outstanding principal balance due on the Maturity Date.

The Borrower may prepay the principal amount in whole or in part at any time without penalty.

All payments and prepayments shall be made by wire transfer or ACH electronic transfer to the Lender's designated account which is Account Number 123456789 at First National Bank with Routing Number 021000021 located at 123 Main Street, New York, NY 10001.

Payment schedules under this Agreement shall begin on or after January 15, 2024.

All payments shall be applied first to accrued interest and then to principal unless otherwise directed by the Lender.

Late fees, if any, shall not exceed the maximum permitted under New York law.

The Borrower shall pay the Lender a commitment fee equal to 0.5 percent per annum on the unused portion of the Line of Credit which fee shall be payable quarterly in arrears.

The Borrower shall pay the Lender an origination fee of 1.0 percent of the maximum Line of Credit amount which fee shall be due and payable on the effective date of this Agreement.

The Borrower shall pay an annual fee of $500.00 USD on each anniversary of the effective date of this Agreement.

The Borrower shall pay any processing fees incurred in connection with each Advance which fees shall be deducted from the Advance proceeds.

The Borrower represents and warrants that the Borrower has full power and authority to execute, deliver, and perform his obligations under this Line of Credit Agreement.

The Borrower represents and warrants that the Borrower's execution of this Line of Credit Agreement does not conflict with any other agreements, or applicable laws.

The Borrower represents and warrants that no governmental approvals, consents, or filings are required for the Borrower to enter into and perform this Line of Credit Agreement, except for UCC filings referenced herein.

The Borrower represents and warrants that the Borrower is not in default under any material contract, lease, or other agreement.

The Borrower represents and warrants that there is no pending or threatened litigation, investigation, or proceeding against the Borrower that could reasonably be expected to have a material adverse effect.

The Borrower represents and warrants that the current total value of the Borrower's assets is $1,500,000.00 USD.

The Borrower represents and warrants that the current total value of the Borrower's liabilities is $500,000.00 USD.

The Borrower represents and warrants that the current net worth of the Borrower is $1,000,000.00 USD.

The Borrower represents and warrants that the Borrower's most current financial statements are dated within the last 90 days prior to the effective date and accurately reflect his financial condition as of a date no earlier than October 1, 2023.

The Borrower represents and warrants that the Borrower's financial statements are true, complete, and prepared in accordance with generally accepted accounting principles.

The Borrower represents and warrants that there have been no material adverse changes in the Borrower's financial condition since the date of the latest financial statements.

The Borrower represents and warrants that the Borrower has timely filed all tax returns and paid all taxes due.

The Borrower represents and warrants that the Borrower is in compliance with all applicable requirements of the Employee Retirement Income Security Act of 1974 regarding employee benefit plans, if any.

The Borrower represents and warrants that the Borrower is in compliance with all environmental laws and regulations.

The Borrower represents and warrants that the Borrower owns or has valid rights to all material intellectual property used in his business.

The Borrower represents and warrants that the proceeds of the Line of Credit will not be used in violation of Regulations T, U, or X of the Federal Reserve Board.

The Borrower represents and warrants that neither the Borrower nor any person or entity controlling or controlled by the Borrower is (i) currently identified on the Specially Designated Nationals and Blocked Persons list maintained by the Office of Foreign Assets Control ("OFAC"), (ii) a person with whom dealings are prohibited under any OFAC sanctions program, or (iii) otherwise in violation of any economic sanctions administered by OFAC or any other governmental authority. The funds used to repay the obligations are not derived from any illegal activity.

The Borrower represents and warrants that this Agreement is for commercial purposes and not for personal, family, or household purposes.

The Borrower shall provide the Lender with quarterly financial statements within forty-five days after the end of each fiscal quarter, commencing with the quarter ending March 31, 2024.

The Borrower shall provide the Lender with annual financial statements within ninety days after the end of each fiscal year, commencing with the year ending December 31, 2024.

The Borrower shall provide the Lender with a compliance certificate with each set of financial statements confirming compliance with all covenants.

The Borrower shall maintain a maximum debt to equity ratio of 2.5 to 1.0 at all times, tested quarterly commencing March 31, 2024. A breach of this covenant shall have a 30-day cure period after notice.

The Borrower shall maintain a minimum current ratio of 1.2 to 1.0 at all times, tested quarterly commencing March 31, 2024. A breach of this covenant shall have a 30-day cure period after notice.

The Borrower shall not incur capital expenditures exceeding $50,000 USD in any fiscal year without the prior written consent of the Lender.

The Borrower shall not incur additional indebtedness without the prior written consent of the Lender.

The Borrower shall not create or permit any liens on its assets without the prior written consent of the Lender except for liens in favor of the Lender.

The Borrower shall limit the payment of dividends or distributions to available cash flow after satisfying all obligations under this Agreement.

The Borrower shall not sell or dispose of assets exceeding $25,000 USD in any fiscal year without the prior written consent of the Lender.

The Borrower shall not merge, consolidate, or acquire other entities without the prior written consent of the Lender.

The Borrower shall provide the Lender with written notice within five Business Days of any material adverse change, default, litigation, or change in management.

The Borrower shall provide the Lender with thirty days advance written notice for any permitted actions such as asset sales that require notice under this Agreement.

The Borrower shall maintain insurance coverage on its assets and business operations in amounts and with insurers acceptable to the Lender.

The Borrower shall permit the Lender access to its books and records upon reasonable request during normal business hours.

The Borrower shall test compliance with financial covenants quarterly commencing March 31, 2024.

The Borrower shall comply with all environmental laws and regulations at all times.

The Borrower shall comply with all applicable anti-money laundering (AML), know-your-customer (KYC), and sanctions laws, including those administered by OFAC. The Borrower shall not use the proceeds of any Advance in violation of such laws.

The Borrower shall deliver copies of any organizational or formation documents (if applicable) and evidence of authority to the Lender prior to the first Advance.

The Borrower shall deliver a certificate of good standing (if applicable) to the Lender prior to the first Advance.

The Borrower shall deliver evidence of identity and authority satisfactory to the Lender prior to the first Advance.

The Borrower shall deliver UCC-1 financing statement searches confirming no prior liens on the Collateral prior to the first Advance.

The Borrower shall deliver releases or terminations of any existing liens on the Collateral prior to the first Advance.

The Borrower shall deliver certificates of insurance covering the Collateral prior to the first Advance.

The Borrower shall deliver his most recent financial statements to the Lender prior to the first Advance.

There shall have been no material adverse change in the Borrower's financial condition since the date of the latest financial statements prior to any Advance.

The Borrower shall deliver a representation that no default under other agreements exists prior to any Advance.

The Lender shall have a perfected first-priority security interest in the Collateral in accordance with Article 9 of the Uniform Commercial Code prior to any Advance.

The Borrower shall deliver an officer's certificate (or personal certificate) confirming satisfaction of all conditions precedent prior to any Advance.

The Borrower shall have executed and delivered the Promissory Note in the form attached as Exhibit A as a condition precedent to the first Advance and each subsequent Advance.

The Borrower shall have provided evidence of compliance with all applicable consumer protection laws, including any required ECOA notices if this transaction is deemed to have a consumer purpose component.

Failure to make any payment when due shall constitute an Event of Default if not cured within ten days after written notice from the Lender.

Breach of any covenant contained in this Agreement (other than payment) shall constitute an Event of Default if not cured within thirty days after written notice from the Lender.

Cross default with any other indebtedness of the Borrower in excess of $10,000 shall constitute an Event of Default under this Agreement.

The bankruptcy or insolvency of the Borrower shall constitute an Event of Default under this Agreement.

Any unsatisfied judgment against the Borrower in excess of $100,000 USD shall constitute an Event of Default if not vacated or bonded within thirty days.

Breach of any representation or warranty shall constitute an Event of Default if not cured within thirty days after written notice from the Lender.

Upon the occurrence of an Event of Default the Lender may accelerate the entire outstanding balance under the Line of Credit and declare it immediately due and payable.

Upon the occurrence of an Event of Default the Lender may set off any amounts owed by the Borrower against any deposits or accounts of the Borrower maintained with the Lender.

Upon the occurrence of an Event of Default the Lender may take possession of any Collateral in accordance with Article 9 of the Uniform Commercial Code.

Upon the occurrence of an Event of Default the Lender may sell the Collateral and apply the proceeds to the outstanding obligations in accordance with Article 9 of the Uniform Commercial Code.

The Lender shall provide the Borrower with ten Business Days notice before exercising any remedies upon an Event of Default to the extent such notice is required by applicable law.

Upon the occurrence of an Event of Default the interest rate on the outstanding balance shall increase as provided in Section 6.4 of this Agreement.

The Borrower shall be allowed ten Business Days to cure monetary defaults before the Lender may fully exercise remedies under this Agreement.

This Agreement shall terminate upon the occurrence of an Event of Default and the Lender's election to terminate the Line of Credit.

Upon termination all outstanding obligations shall be accelerated and become immediately due and payable upon ten Business Days written notice from the Lender.

Failure to pay principal, failure to pay interest, or breach of covenants shall constitute events permitting termination and acceleration under this Section.

The Borrower shall be provided a cure period as set forth in Section 12 prior to termination and acceleration.

Upon termination the Lender shall cease making any further Advances and may demand delivery of Collateral.

Acceleration shall not occur automatically but shall require affirmative action by the Lender.

The Borrower shall indemnify the Lender against all losses, claims, damages, liabilities, and expenses arising from this Agreement including those related to default and enforcement actions.

The Borrower shall indemnify the Lender against any taxes, duties, or similar charges imposed in connection with the Line of Credit.

The indemnification shall cover the Lender's reasonable attorneys' fees and other legal expenses incurred in enforcing this Agreement or defending claims.

The Lender shall provide the Borrower with thirty calendar days notice of any claim before seeking indemnification under this Section.

The indemnification obligations under this Section shall survive termination or repayment of this Agreement.

The Borrower shall reimburse the Lender for all reasonable legal fees incurred in connection with the enforcement of this Line of Credit Agreement.

The Borrower shall reimburse the Lender for all court costs associated with any legal proceedings related to this Line of Credit Agreement.

The Borrower's obligation to reimburse expenses and costs shall arise upon default on payments, breach of covenants, or acceleration of the obligations under this Agreement.

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

This Agreement is made in compliance with the Truth in Lending Act (TILA) (to the extent applicable), Regulation Z (12 CFR Part 1026), the Equal Credit Opportunity Act (ECOA), Regulation B (12 CFR Part 1002), Regulation V (12 CFR Part 1022), and the Uniform Commercial Code (UCC) Article 9.

The Borrower consents to the exclusive jurisdiction of the courts of the State of New York located in New York County for any dispute arising under this Agreement.

Venue for any legal proceedings related to this Agreement shall be in the state or federal courts located in New York County, New York.

The Borrower consents to the personal jurisdiction of the designated courts in the State of New York.

Service of process upon the Borrower may be made by certified mail to the Borrower's address set forth in the Notices section of this Agreement.

EACH PARTY TO THIS AGREEMENT HEREBY KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVES ITS RIGHT TO A JURY TRIAL IN ANY LITIGATION ARISING FROM OR RELATED TO THIS AGREEMENT. THIS WAIVER IS A MATERIAL INDUCEMENT TO THE LENDER TO ENTER INTO THIS AGREEMENT.

The waiver of jury trial shall apply to all disputes governed by the law of the State of New York under this Agreement.

All notices under this Agreement shall be in writing and delivered by hand delivery, certified mail, or email.

Notices to the Borrower shall be sent to 123 Main Street, New York, NY 10001 and shall be deemed effective upon receipt (or upon sending if by email with confirmation).

Notices to the Lender shall be sent to 456 Oak Avenue, Los Angeles, CA 90210 and shall be deemed effective upon receipt (or upon sending if by certified mail, overnight courier, or email with confirmation).

Each party shall provide the other with thirty days prior written notice of any change in its notice address.

This Agreement, together with the Promissory Note and any exhibits, constitutes the entire understanding between the parties and supersedes all prior understandings or agreements between the Lender and the Borrower.

This Agreement may only be modified by a written amendment signed by both the Lender and the Borrower.

Oral amendments to this Agreement are expressly prohibited.

Any waiver of any provision of this Agreement must be in writing and signed by the Lender.

Any waiver by the Lender applies only to the specific breach and does not waive any future breaches by the Borrower.