Loan Agreement

A Loan Agreement outlines the terms of a loan between a borrower and lender, and sets out a payment plan for the borrower to repay the lender.

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