Business and Personal Finance Dictionary

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• STANDBY COMMITMENT
  
  A commitment to purchase a loan or loans with specified terms, both parties understanding that delivery is not likely unless circumstances warrant. The commitment is issued for a fee with willingness to fund in the event that a permanent loan is not obtained. Such commitments are typically used to enable the borrower to obtain construction financing at a lower cost on the assumption that permanent financing of the project will be available on more favorable terms when the improvements are completed and the project is generating income.
  
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