A Loan Agreement is used to document and set out the terms of a loan between individuals, between corporations, or between an individual and a corporation.
When a business or company is either starting up or wishes to expand, it likely requires additional money or capital. Additional funds can be obtained from either a bank or a third party willing to loan the money to the business. Where money is loaned to a business, the lender will want to have the borrower sign a loan agreement that details certain key issues regarding the loan.
In other cases, an individual may want to lend money to another individual for personal reasons (eg. to help a person buy a car or pay for university).
Key issues to be included in a Loan Agreement include:
- the amount of the loan
- when funds are to be advanced
- amount of interest to be charged
- documentation to evidence advancement of funds such as a promissory note
- repayment terms and rights of prepayment if any
- how and when payments are to be made
- various promises made by the borrower
- issues surrounding when a lien will be granted to secure the funds against any assets
- events that would be considered default under the loan
- remedies available to the lender in the event the borrower default or fails to repay the loan
- provisions dealing with any other issues of concern to the lender or borrow
- general legal terms
Download: Loan Agreement form