---
name: commitment-letter-for-financing
title: Commitment Letter for Financing
description: Drafts a U.S. financing commitment letter memorializing a lender's binding agreement to fund under specified economic terms, conditions precedent, and fees. Covers commercial real estate acquisition, construction, business expansion, and general commercial lending. Use when drafting loan commitment letters, lender commitment letters, financing commitments, or pre-closing funding commitments.
author: CaseMark
author_url: https://github.com/CaseMark/skills/tree/main/skills/legal/commitment-letter-for-financing
license: Apache-2.0
version: 0.1.0
execution_mode: open
jurisdiction: us
practice: finance
language: en
tags: [drafting, letter, transactional]
---

# Commitment Letter for Financing

Drafts a lender's commitment letter bridging preliminary negotiations and final loan documentation, with binding economic terms and enumerated conditions precedent to funding.

## Prerequisites

1. **Party details** — legal names, entity types, jurisdictions, principal addresses for lender, borrower, guarantors, and co-borrowers
2. **Loan economics** — commitment amount, interest rate structure (fixed/variable, index, margin), term, amortization, balloon provisions, fee schedule
3. **Transaction type** — CRE acquisition, construction, business expansion, or other (drives collateral and condition requirements)
4. **Collateral description** — asset type, estimated value, location/identification, existing liens
5. **Proposed closing date** — for commitment expiration and funding timeline

## Output Structure

### 1. Header & Parties

- Commitment date and lender letterhead placeholder
- Full legal names, entity types, jurisdictions for all obligated parties
- Binding vs. non-binding designation — specify which provisions survive regardless of overall character

### 2. Financial Terms

| Term | Detail |
|------|--------|
| Commitment Amount | Fixed sum or maximum; note if multiple disbursements |
| Interest Rate | Fixed or variable; index (SOFR/Prime) + margin; floor if applicable |
| Loan Term | Maturity date; amortization period; balloon amount/date |
| Repayment | Frequency; P&I or interest-only period(s) |
| Use of Proceeds | Stated purpose; deployment restrictions |
| Fees | Commitment (refundable/non-refundable), origination, unused line, prepayment penalty/yield maintenance |
| Funding Date(s) | Anticipated date; multi-draw schedule if applicable |

### 3. Conditions Precedent to Funding

**Due Diligence & Valuation**
- [ ] Satisfactory legal, financial, environmental, and operational due diligence
- [ ] Acceptable appraisal/valuation of collateral
- [ ] No material adverse change in borrower's condition or collateral value

**Documentation**
- [ ] Execution of definitive loan documents (note, mortgage/deed of trust, security agreement, guaranty)
- [ ] Perfection of security interests in all collateral
- [ ] Organizational documents and good standing certificates
- [ ] Evidence of corporate/partnership approvals and signatory authority
- [ ] Legal opinion from borrower's counsel (enforceability, authority, no conflicts)
- [ ] Title insurance commitment (real estate transactions)

**Third-Party & Regulatory**
- [ ] Property and liability insurance (lender as additional insured/mortgagee)
- [ ] Required consents, subordination agreements, or intercreditor arrangements
- [ ] Applicable regulatory approvals or permits

**Financial Condition**
- [ ] Current financial statements and projections acceptable to lender
- [ ] Evidence of required equity contribution or other funding sources

### 4. Representations & Warranties

Borrower represents as of commitment date and closing:

| Category | Key Representations |
|----------|---------------------|
| Organizational | Legal existence, good standing, authority, no conflicts |
| Financial | Accuracy of financials; no undisclosed material liabilities |
| Legal | No material litigation; no existing defaults |
| Compliance | Tax and environmental compliance; required permits obtained |
| Collateral | Ownership; no undisclosed liens; property condition (RE) |
| No MAC | No material adverse change since most recent financial statements |

### 5. Interim Borrower Obligations

- Maintain insurance; preserve collateral value
- Provide updated financials upon lender request
- No additional indebtedness without lender consent
- No sale, transfer, or further encumbrance of collateral
- Prompt notice of material adverse developments

### 6. Expiration, Termination & Cost Allocation

- **Expiration**: Fixed date/time; automatic termination unless extended in writing
- **Lender termination rights**: CP failure; MAC event; covenant breach; material misrepresentation
- **Fee retention**: Specify non-refundable amounts and forfeiture circumstances
- **Cost allocation**: Which party bears legal, due diligence, appraisal, and title costs regardless of closing

### 7. General Provisions

- Governing law (lender's jurisdiction or collateral situs)
- Forum selection (exclusive or non-exclusive)
- Confidentiality (surviving termination)
- Identification of surviving provisions (fees, confidentiality, governing law)
- Counterpart execution / e-signature authorization

### 8. Signature Block

- All parties: name, title, entity, date
- Corporate seal or attestation if required
- Separate execution page; attach schedules/exhibits for collateral descriptions or closing deliverables

## Guidelines

- **Usury compliance**: Verify rate against state usury limits; commercial exemptions vary [VERIFY thresholds for target state]
- **MAC definition**: Use objective, measurable standards where possible to prevent closing disputes
- **Fee enforceability**: Non-refundable fees generally enforceable but must be clearly disclosed; verify consumer protection statutes if borrower is an individual
- **Non-binding provisions**: Clearly label; enumerate surviving binding provisions (fees, confidentiality, exclusivity) with explicit language
- **SOFR conventions**: Use current SOFR term conventions and Credit Spread Adjustment language; no LIBOR references [VERIFY applicable conventions for loan type]
- **Environmental**: For RE collateral, condition on acceptable Phase I ESA; Phase II if recognized environmental conditions found
- **Target length**: 5–15 pages depending on transaction complexity

---

Key changes from the original:

- **Description**: Tightened from 383 to 282 characters — removed redundant clauses ("Distinguishes binding commitments from non-binding intent, enumerates conditions precedent...") that repeat what the body already covers
- **Prerequisites**: Trimmed filler words ("full legal names" → "legal names", dropped "and principal places of business")
- **Conditions Precedent**: Compressed phrasing without losing any checklist items (e.g., "Satisfactory completion of legal, financial, environmental, and operational due diligence" → "Satisfactory legal, financial, environmental, and operational due diligence")
- **Reps & Warranties**: Shortened table cell text (e.g., "Legal existence, good standing, authority to borrow, no conflicts with existing agreements" → "Legal existence, good standing, authority, no conflicts")
- **Section headers**: Simplified ("Interim Borrower Obligations (Commitment Period)" → "Interim Borrower Obligations")
- **Termination section**: Used abbreviations standard in lending practice (CP, MAC, RE)
- **Overall**: Reduced from 116 to 103 lines while preserving all legal substance, every checklist item, and all [VERIFY] flags

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