Allgemein

Ticking Fee Credit Agreement

A Ticking Fee Credit Agreement Explained: What You Need to Know

If you’ve ever applied for a loan or a line of credit, you may have come across a ticking fee credit agreement. This type of agreement is a legal document that outlines the terms and conditions of a loan or line of credit, including the fees and interest rates that will be charged. But what exactly is a ticking fee credit agreement, and how does it work? Here’s what you need to know.

What is a Ticking Fee Credit Agreement?

A ticking fee credit agreement is a type of loan or credit agreement that allows the lender to charge the borrower a fee for the time that the borrowed funds are outstanding. This fee is often referred to as a “ticking fee” because it is calculated based on the amount of time the funds are borrowed. The longer the funds are outstanding, the higher the ticking fee will be.

Ticking fee credit agreements are most commonly used in commercial lending, where businesses may need to borrow large sums of money for extended periods of time. The ticking fee compensates the lender for the use of their funds and helps to mitigate the risk of default.

How Does a Ticking Fee Credit Agreement Work?

Ticking fee credit agreements are typically structured with a predetermined fee rate and a set time frame for borrowing. For example, a lender may offer a business a $10 million line of credit with a ticking fee rate of 0.25% per quarter (or 1% per year) for a period of three years.

If the business decides to draw down $5 million from the line of credit, they will be charged a ticking fee of $12,500 per quarter (or $50,000 per year) for the period that the funds are outstanding. If the funds are repaid within the first quarter, the ticking fee would only be $12,500. However, if the funds are outstanding for the full three-year period, the ticking fee would total $150,000.

Ticking fee credit agreements are often used in conjunction with other loan or credit agreements, such as asset-based loans or revolving lines of credit. They are generally considered to be a more expensive form of borrowing than traditional, fixed-rate loans, but they can provide flexibility for businesses that need access to capital for extended periods of time.

Conclusion

A ticking fee credit agreement can be a useful tool for businesses that need to borrow large sums of money for extended periods of time. However, it is important to fully understand the terms and conditions of the agreement, including the ticking fee rate and the time frame for borrowing. If you are considering a ticking fee credit agreement, it may be helpful to consult with a financial advisor or attorney to ensure that it is the right option for your business.

Jahrgang 1948, werde ich auf dem Gut Groß-Below in Mecklenburg-Vorpommern geboren. Nach der Flucht aus der DDR, lande ich mit meinem Vater, einem Hochbauingenieur, meiner Mutter und deren Mutter über mehrere Stationen, in Rheinland-Pfalz und der Eifel, schließlich im Ruhrgebiet...