Supplemental Funding Agreement: An Overview
A supplemental funding agreement is a legal document that is used to modify or add new terms and conditions to an existing loan agreement. This agreement is usually entered into by the lender and borrower to provide additional funds or to modify the original loan amount.
Supplemental funding agreements are commonly used in the business world. When a company requires additional financing to support its operations, it may approach its existing lender to request additional funding. The lender may agree to provide additional funds but will require a supplemental funding agreement to be signed.
A supplemental funding agreement typically includes the following:
1. The amount of additional funds being provided.
2. The terms and conditions of the additional funding, including interest rate, repayment schedule, and any fees associated with the funding.
3. The purpose of the additional funding, i.e., how the funds will be used to strengthen the business.
4. Any covenants or conditions that the borrower must meet to remain in compliance with the lender’s requirements.
5. Any legal disclosures that must be made by the borrower to the lender.
Supplemental funding agreements are also used in the public sector. For example, when a state or local government receives federal funding for a particular project, a supplemental funding agreement may be required to further specify how the funds will be used and how the project will be managed.
In conclusion, a supplemental funding agreement is an important legal document that is used to provide additional funding or to modify the terms and conditions of an existing loan agreement. It is crucial that both parties fully understand and agree to the terms outlined in the agreement before signing. As a business owner or government representative, it’s imperative that you work closely with your lender or funding source to ensure that the supplemental funding agreement accurately reflects your needs and goals.
