What is the difference between the assignment of a take-out commitment to the construction lender and a triparty agreement? If neither device is used in project financing, what is the relationship between lenders in such a case?
What is the difference between the assignment of a take-out commitment to the construction lender and a triparty agreement? If neither device is used in project financing, what is the relationship between lenders in such a case?
Take-out commitment is an agreement between lender and borrower in which lender provides guarantee to borrower for forming a contract to provide permanent financing as required by borrower.
This source of financing is generally used when borrower is not sure whether his short term funding for the project is adequate or not and the borrower may require an instant financing which would finance the alleged project till its completion.
It works as an option which may or may not be used as a source of finance, if some better substitute is found.
On the other hand, a tri-party agreement is a three party agreement which involves the borrower, the permanent lender and the construction lender. This source of financing is generally used in construction of new houses and buildings etc.
The borrower is the ultimate buyer of the building, however, since the project, still does not bear the name of the project, builder is also involved in the contract.
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