Definition of Funding Agreement:
A funding agreement is a type of investment that some institutional investors utilize because of the instrument's low-risk, fixed-income characteristics. The term usually refers to an agreement between two parties, with an issuer offering the investor a return on a lump sum investment. Generally, two parties may enter into a legally binding funding agreement, and the terms will typically outline the scheduled use of capital as well as the expected rate of return over time to the investor.
A funding agreement product requires a lump sum investment paid to the seller, who then provides the buyer with a fixed rate of return over a specified time period, often with the return based on LIBOR, which has become the most popular benchmark in the world for short-term interest rates.
Contracts guaranteeing repayments of principal and interest over a stated period of time. These can take many forms and are altered depending on the funding needed, the parties involved and the scale of the funded project.
How to use Funding Agreement in a sentence?
- Due to its low-risk nature, the return to the investor from a funding agreement is usually modest.
- Portfolios that are focused on capital preservation, rather than growth, are more likely to enter into funding agreements.
- While the investor provides a lump sum of money, the issuer guarantees a fixed rate of return over a time period.
- A funding agreement is an agreement between an issuer and an investor.
- Funding agreements are popular with high net worth and institutional investors due to their low-risk, fixed-income nature.
Meaning of Funding Agreement & Funding Agreement Definition