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A Demand Loan And Term Loan agreement is a sophisticated financial document that combines two distinct lending facilities within a single contract framework. This dual-facility structure allows you to access both demand loans (repayable on call) and term loans (with fixed repayment schedules) from the same lender under unified terms and conditions. The document is particularly valuable in Australian commercial lending where businesses require flexible financing solutions that accommodate both short-term working capital needs and longer-term investment requirements.

When do you need this document?

You need this agreement when establishing a lending relationship that requires multiple facility types. Business borrowers often use this structure when they need working capital facilities for day-to-day operations alongside term facilities for equipment purchases, property acquisition, or expansion projects. Property developers frequently utilize dual facilities to finance both construction costs and development expenses under a single agreement. Corporate borrowers also benefit when they require revolving credit facilities for cash flow management combined with term loans for strategic investments. The document is essential when lenders want to provide comprehensive financing solutions while maintaining consistent security arrangements and covenant structures across all facilities.

Key legal considerations

The agreement must clearly distinguish between demand and term facility provisions, including different drawdown procedures, interest calculation methods, and repayment obligations. Security arrangements require careful structuring to ensure they adequately cover both facilities while complying with Personal Property Securities Act registration requirements. Default provisions need specific attention as events of default may affect one or both facilities differently. Cross-default clauses must be precisely drafted to avoid inadvertent acceleration of performing facilities. Financial covenants should reflect the borrower's ability to service both facilities simultaneously. Guarantees and third-party security arrangements must explicitly cover both demand and term obligations to ensure enforceability.

Legal requirements in Australia

Australian dual-facility agreements must comply with the National Consumer Credit Protection Act 2009 when involving consumer borrowers, including responsible lending obligations and mandatory disclosure requirements. The Banking Act 1959 governs prudential requirements for authorized deposit-taking institutions providing these facilities. Security interests must be registered under the Personal Property Securities Act 2009 to ensure priority and enforceability. Anti-Money Laundering and Counter-Terrorism Financing Act 2006 obligations apply to customer identification and transaction monitoring. ASIC unfair contract terms provisions under the Australian Securities and Investments Commission Act 2001 may apply to small business borrowers. Interest rate disclosure requirements and cooling-off periods may be mandatory depending on the borrower type and facility amount. Proper documentation of each facility's terms, conditions, and security arrangements is essential for legal enforceability and regulatory compliance.