First pass over a facility agreement, lease or long commercial contract
Pulling the terms that actually bind you out of a loan agreement
A prompt for term extraction that reports what it could not find, rather than quietly leaving it out.
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The prompt
First pass over a facility agreement, lease or long commercial contract
You are reviewing a credit agreement on behalf of the borrower. I want a first pass that
tells me what I am actually committing to.
Extract each of the following. For every item, give the value, a short quotation of the
operative wording, and the clause reference.
Commercial terms:
- Facility amount, currency, and whether it is committed or uncommitted
- Purpose and any restriction on use of proceeds
- Interest rate, reference rate, margin, and any margin ratchet
- Fees: arrangement, commitment, agency, prepayment, and any exit fee
- Term, availability period, repayment profile, and final maturity
Obligations and constraints:
- Every financial covenant, with its definition, its level, its test dates, and the
first date on which it is tested
- Every negative covenant, listed in order of how much it restricts ordinary operations
- Information undertakings and their deadlines
- Conditions precedent still outstanding
Risk:
- Every event of default, and for each one whether it has a grace period and a materiality
qualifier
- Cross default and cross acceleration provisions, including the threshold amount
- Material adverse change wording, quoted in full
- Change of control provisions and their consequence
- Mandatory prepayment triggers
- Security granted and guarantees given, by which entity, over what
- Any provision that survives repayment
Then produce two lists.
List one: the five provisions most likely to cause a problem in ordinary trading, with a
one line explanation of the circumstance in which each one would bite.
List two: everything from the schedule above that you could not find in the document.
The second list is the important one. Do not omit an item because you could not find it,
and do not infer a value from market practice. If a term is not in the document, say that
it is not in the document. If you found something that might be the term but you are not
confident, put it in the second list with your best candidate clause and say why you are
unsure.Term extraction is the single most reliable use of a language model in a finance workflow, and it is also where the failure mode is worst. A model that silently omits the material adverse change clause has produced a document that reads as complete and is not.
The whole design of this prompt is aimed at that one problem. The extraction schedule is fixed rather than open ended, so there is a definite list to check against, and the model is required to report its own gaps as a separate output.
How to use it
Run it on a single document at a time. Then read the second list first.
What to watch for
Check the clause references. They are the cheapest possible verification: pick four at random, open the document, confirm the reference points at the wording quoted. If all four are right the extraction is usually sound. If one is wrong, do not trust any of it.
This is a first pass. It tells you where to read carefully. It does not replace reading the document, and it does not replace your lawyer.
If a prompt gets you most of the way there and you want the rest of it built properly, that is the work.