Held by Production Clause

A held by production clause is a provision in a loan agreement that requires the borrower to use the proceeds of the loan to purchase or lease production equipment. The clause is designed to ensure that the borrower has the necessary equipment to produce the goods or services that will be used to repay the loan.

The held by production clause is typically used in loans to businesses that are in the early stages of development. These businesses may not have the necessary equipment to produce their products or services, and the held by production clause helps to ensure that they will have the equipment they need to get started.

The held by production clause can also be used in loans to businesses that are in need of new or replacement equipment. These businesses may have the necessary equipment, but they may need to upgrade or replace it in order to remain competitive. The held by production clause can help to ensure that the borrower has the resources to purchase or lease the necessary equipment.

The held by production clause is a valuable tool for lenders who are lending to businesses that need equipment to produce their products or services. The clause helps to ensure that the borrower has the necessary equipment to get started or to remain competitive, and it can help to protect the lender's investment.