Deficiency agreement,

Definition of Deficiency agreement:

1. Arrangement in which the sponsor of a construction project, or a third party, undertakes to make up for any shortfall in debt service caused by insufficient working capital or cash inflows. Also called make up agreement.

2. It is not uncommon to see this expression called a cash deficiency agreement. For project finance sponsors, a deficiency agreement makes up for any shortfall caused by insufficient working capital or cash inflows. In these instances, they may also be referred to as a make up arrangement.

3. A deficiency agreement is an arrangement in which a party provides a firm with funds to cover any shortfalls arising from capital or cash flow restraints, allowing the company to service its debt. A deficiency agreement will usually have a cumulative limit specified by the lending party.