Overview

If you lend money to anyone it is important to have evidence of the loan and its terms. By having a Loan Agreement that clearly sets out the basis upon which money has been lent, it becomes easier to enforce the terms of the loan and easier to show that it was in fact a loan and not a gift.

This is an unsecured loan by one company to another company. The loan agreement provides options as to whether interest is payable or not, and whether the loan is repayable by instalments. If the loan is to carry interest then the interest rate should be inserted. If the loan is to be repaid on a fixed date or on the happening of an event then that date or event should be inserted.

The loan agreement provides an option to include a guarantor. A guarantor is a person who promises to pay and meet all the obligations of the borrower if the borrower fails to pay or meet those obligations. LawLive recommends that you always ask for a guarantee from a second person, usually a relative or close friend of the borrower. It is good practice to check before you agree to lend the money that the guarantor and the borrower both have sufficient assets to enable them to repay you.

NOTE: This is an unsecured loan agreement. That means that if the borrower does not pay you back you may have to take legal proceedings to recover your loan.