A letter of commitment is a document between two parties, usually a lender and a borrower, stating the commitment of the lender to lend a specified amount of money to the borrower. For example, if a businessman goes to a private financier and asks for a $10000 loan, and the financier agrees, the financier will provide the businessman with a letter of commitment saying so.

Tips for writing a letter of commitment

-          Don’t use ambiguous terms

-          Make sure all the terms are agreed upon – don’t try to sneak in extra clauses

-          Don’t use general terms – try to be as clear as possible

Sample letter of commitment

Bill Bigelow

Bills Real Estate

Toronto, Ontario

Dear Bill,

As per our previously negotiated agreement, I commit to lending you and your business, Bills Real Estate, the sum of $500,000 over the next 30 days. It will be delivered in increments of $50,000 to the bank account specified in your loan request. If you need more money, I will loan you another $200,000 over the following 60 days in amounts that will be negotiated in the future. If I fail to make these loans to your business, I will pay the penalties laid out in our previous agreement.

Sincerely,

Signature.