A fixed offer generally stipulates that it remains open for a period of time during which it cannot be revoked. An example of a firm commitment to a loan is when a finance company or bank agrees to provide a loan for the construction of a property. For example, a local bank may commit to providing the funds needed to build a shopping mall in the neighbourhood. In order to avoid any doubt, the parties agree that the solvency and credit support requirements set out in Section 10, as well as all the provisions of this framework agreement necessary to make sense of these solvency and credit assistance requirements, will remain fully in effect after the expiry or termination of this contract and for the duration of the enterprise transport contract. A firm commitment has three general meanings in finance, but it is best known as an insurer`s agreement to assume the full risk of outstanding assets and purchase all securities directly from the issuer for an IPO for sale to the public. It is also called the Firm Commitment Underwriting. The term also refers to a credit institution`s commitment to enter into a loan agreement with a borrower within a specified period of time. A third application of the firm concept of commitment concerns the accounting and reporting of derivatives used for hedging purposes. In a firm commitment, a sub-manager acts as a distributor and assumes responsibility for unsold inventory. To take this risk through a firm commitment, the trader benefits from a negotiated margin between the issuer`s purchase price and the price of the offer to the public. A firm commitment sales method contrasts with the best efforts and the foundations of standby engagement. A subpayer who sells the best of securities does not guarantee the full sale of an issue at the issuer`s desired price and does not record an unsaleable inventory.
n. an offer (usually written) that states that it cannot be revoked, revoked or amended for a specified period of time. If the offer is accepted without modification during this period, there is a firm and enforceable contract. (See: Contract, Offer, Acceptance) The other two common applications for a firm commitment are loans and derivatives. For example, when a borrower is looking for a large loan for planned capital expenditures, they can get a firm commitment from a lender to continue.