Standby Agreement

What does it mean

A Stand-By Agreement is a mutual agreement between a bank and another creditor. It stipulates that the other creditor will refrain from accepting payments on its loan if the bank fails to make its loan payments.

 

Why does it matter

A Stand-By Agreement can be highly beneficial when a Seller Carryback is involved. In such an agreement, another creditor commits to not accepting payments on their loan if the obligated payments are not being made. This additional provision offers the bank an extra layer of cash flow protection. In case of a decrease in cash flow, the Stand-By Agreement acts as a pressure release valve, allowing the bank to access additional cash flow to navigate through challenging periods more easily.

 

Other Relevant Terms

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A bit about me

Greetings! I'm Clay Sharkey, and there is nothing I like more than assisting others in achieving their goals. I firmly believe that by enhancing a banker's understanding of their customer's' business, they can provide superior service. This superior service, in turn, leads to stronger relationships for the bank, improved performance for the businesses, and better experiences for our communities.  Win-win-win.