Prepare a Subordination Agreement between two lenders with this long form template.
- The purpose of the Subordination Agreement (also called a Postponement Agreement) is to induce a new lender to extend a loan to a borrower.
- One lender (postponing creditor) agrees to subordinate and postpone its security interest under a loan agreement or similar instrument to the interest of a second lender (senior creditor) until the indebtedness owing to the senior creditor has been satisfied.
- If the borrower's assets are distributed among its creditors, the indebtedness owing to the senior creditor would be paid out first, before distribution to any other creditors.
- If the borrower is not in default under its obligations to the senior creditor, it may continue to make payments to the postponing creditor in accordance with the terms of the agreement.
- If the borrower is in default under its obligations to the senior creditor, no payments on the subordinated indebtedness shall be made by the borrower. If the postponing creditor receives any such payments, it must pay them over to the senior creditor.
This generic Subordination Agreement
is provided in MS Word, and is fully editable to meet your needs.
Last Updated: 14-April-2016