A cam provision credit agreement is a type of loan agreement that includes a contingency that allows the lender to adjust the cost of the loan based on changes in operating costs. CAM, or Common Area Maintenance, is a term used to describe the expenses associated with maintaining a commercial property.
In a cam provision credit agreement, the borrower agrees to pay a base rent or loan payment, as well as any additional expenses related to the maintenance and upkeep of the property. These expenses may include things like landscaping, snow removal, and repairs.
The cam provision in the loan agreement is designed to ensure that the lender is not taking on any unexpected costs that could impact the profitability of the loan. By including this contingency, the lender is able to adjust the cost of the loan based on changes in the operating costs associated with the property.
For example, if the cost of maintaining the property increases due to a harsh winter, the borrower may be required to pay additional fees to cover the increased cost. Similarly, if the cost of maintaining the property decreases due to a mild winter, the lender may be required to reduce the cost of the loan accordingly.
It is important to note that cam provision credit agreements are typically used for commercial real estate loans, rather than personal loans. This is because commercial properties often have higher operating costs, and the lender needs to ensure that they are not taking on any unnecessary risk.
If you are considering taking out a cam provision credit agreement, it is important to carefully review the terms of the loan to ensure that you understand the potential costs and risks associated with the loan. You should also work with a qualified attorney or financial advisor to ensure that you are making an informed decision.
In conclusion, a cam provision credit agreement is a type of loan agreement that includes a contingency that allows the lender to adjust the cost of the loan based on changes in operating costs. This type of loan is typically used for commercial real estate loans and is designed to protect the lender from unexpected costs. If you are considering taking out a cam provision credit agreement, it is important to carefully review the terms of the loan and consult with a qualified professional.