Facility Freeze

Facility Freeze is a risk control measure in foreign trade and supply chain finance, referring to a bank, factor, or financial institution suspending a company's use of the undrawn portion of its credit facility. It commonly occurs in import letter of credit issuance, export bill discounting, and packing loans. Triggers include: deterioration of the borrower's financial condition, depreciation of collateral, rising industry risks, regulatory requirements, or suspected fraud. After a freeze, the company cannot open new letters of credit, apply for new financing, or make drawdowns; existing letters of credit may remain valid but their expiry dates should be monitored. Unlike a 'facility reduction,' a freeze is a temporary suspension and the facility may be restored; unlike a 'facility cancellation,' a freeze does not permanently revoke the credit line. Precautions: companies should closely monitor bank notices, assess the impact on pending orders and cash flow, promptly communicate with the bank about unfreezing conditions, and consider backup financing channels. In addition, a facility freeze may trigger cross-default clauses in loan agreements, so precautions should be taken in advance.