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Protect borrower and lender interests with this customizable loan agreement template, outlining loan terms and repayment conditions.
Want to manage loan agreements faster and more efficiently? Click on the image above to book a demo.
Want to manage loan agreements faster and more efficiently? Click on the image above to book a demo.
Our templates are for general information only. You should not rely on them, and Juro is not liable for any reliance on them. The templates might contain errors, including unlawful provisions and might create risks and liabilities if used. The templates are not legal advice, nor a substitute for it. By accessing any template, you accept these terms and agree that any use is at your own risk. Some of these templates were created using generative AI with human-assisted prompts.
Our templates are for general information only. You should not rely on them, and Juro is not liable for any reliance on them. The templates might contain errors, including unlawful provisions and might create risks and liabilities if used. The templates are not legal advice, nor a substitute for it. By accessing any template, you accept these terms and agree that any use is at your own risk.
When managing business finances, clear and effective contracts are vital. One such critical document is the loan agreement. This article will explore everything you need to know about loan agreements, including their purpose, use cases, key elements, and how to manage them efficiently using Juro.
What is a loan agreement?
A loan agreement is a contract created between a lender and borrower that outlines the terms of a lending arrangement.
This agreement typically covers the terms and conditions of a loan, including the amount borrowed, the interest rate, repayment schedule, and any other relevant details.
Also known as a lending agreement, loan agreements can be used in various contexts, from personal loans between friends and family to complex corporate financing arrangements.
In any case, these loan agreements need to be watertight.
What is the purpose of a loan agreement?
The primary purpose of a loan agreement is to protect the lender and borrower in the event of a misunderstanding or miscommunication.
It achieves this purpose by clearly outlining the specific obligations and responsibilities involved in the loan’s execution, covering everything from how much will be borrowed to the instalments it will be paid back in, and at what time.
So long as the loan agreement template is drafted carefully and covers these areas comprehensively, the contract will act as a strong point of reference for parties involved in the lending process.
Is a loan agreement legally binding?
Like any contract, a loan agreement will be legally binding so long as it has the key elements of a contract. Loan agreements are also easier to rely on when they are signed electronically or in wet ink, rather than made orally.
When are loan agreements used in a business context?
Loan agreements are critical in various business scenarios, providing a clear, legally binding framework for lending and borrowing activities.
Let’s explore a few common examples of loan agreements in practice now.
Seed capital: Entrepreneurs often use loan agreements when securing initial funding from investors or lenders to start a new business.
Business expansion: Companies seeking to expand their operations, open new branches, or enter new markets might use loan agreements to secure the necessary funds.
Acquisition financing: When a business acquires another company, loan agreements can be used to finance the purchase.
Equipment loans: Businesses frequently use loan agreements to finance the purchase of new equipment or machinery.
Asset financing: Loans can be used to purchase other significant assets, such as vehicles, real estate or technology.
Inventory financing: Companies may use loans to purchase inventory – particularly in industries with seasonal sales cycles.
Emergency funding: During economic downturns, natural disasters or other crises, businesses may secure loans to maintain operations and manage cash flow disruptions.
Export financing: Companies can secure loans to support the export of goods, covering costs until payment is received from foreign buyers.
Whatever you’re borrowing or lending for, you’ll need to protect your business with a robust, carefully drafted loan agreement template. So, what should that template include?
What should a loan agreement template include?
A comprehensive loan agreement template should include the following key elements to ensure clarity and legal soundness:
Parties’ details: Clearly identify the parties involved (lender and borrower) with their full names and addresses.
Loan amount: Specify the principal amount or money being borrowed under the loan agreement.
Purpose of loan: Outline the intended use of the loan funds, if applicable and relevant to the lending arrangement.
Interest rate: State the annual interest rate or method for calculating interest for the total repayments.
Repayment schedule: Detail the repayment plan, including the frequency and amount of each payment.
Payment method: Specify how payments will be made, and timings for each of these different methods (e.g., bank transfer, check).
Collateral description: If the loan is secured, detail the collateral provided by the borrower and what happens to it in case of a breach of contract.
Definition of default: Clearly define what constitutes a default under the agreement, and the remedies for default, including the lender’s right to demand immediate repayment if the borrower defaults..
Borrower's representations: State the borrower's declarations regarding their financial status and ability to repay the loan, and any relevant declarations from the lender.
Affirmative covenants: Outline actions the borrower agrees to take (e.g., maintaining insurance, providing financial statements).
Negative covenants: Specify actions the borrower agrees not to take (e.g., incurring additional debt, disposing of collateral).
Jurisdiction: State the governing law and jurisdiction for any disputes arising from the agreement.
Amendments: Specify how amendments to the agreement must be made, or when a contract addendum can be used.
Notices: Detail how notices between parties should be delivered throughout the contract’s duration.
How to write a loan agreement
Writing a loan agreement involves more than just listing terms and conditions; it's a process that ensures both parties understand and agree on the loan's specifics. Here's a detailed guide on how to draft a loan agreement:
1. Consider the type of loan agreement you need
Understand the purpose: Before you begin writing, clarify the purpose of the loan and the relationship between the parties. This will help you tailor the agreement to the specific situation (e.g., personal loan, business loan, secured or unsecured).
Educate yourself on legalities: Familiarize yourself with the legal requirements for loan agreements in your jurisdiction. Depending on the amount and nature of the loan, specific legal provisions may need to be included.
2. Gather all necessary information
Clarify the parties’ details: Collect accurate information about both the lender and borrower, including full legal names, addresses, and contact details.
Decide on loan terms: Decide on the key terms of the loan, such as the principal amount, interest rate, repayment schedule, and collateral (if applicable).
Work on a payment schedule: Start outlining a payment schedule you’d like to formalize within the loan agreement template.
3. Drafting the Loan Agreement
Access a template: If you have one, leverage an existing loan agreement template, like the one you can download on this page. This will give you a strong starting point and can be customized with ease.
Request legal’s drafting assistance: If you don’t have a pre-made loan agreement template, you should lean on your legal team for guidance and drafting. This will reduce the contractual risk involved and strengthen your position as either a lender or borrower.
Populate the agreement: Once you’ve got the templated terms for your loan agreement, you can customize it and make it fit for use by inserting the details we outlined above. The more detail, the better.
Once the loan agreement is fully signed and executed, lenders and borrowers each have the task of monitoring the contract and performing their contractual obligations. Let’s runt through what this process looks like in practice:
1. Create a centralized system for contract storage
Set up a digital repository: Store all loan agreements in a secure, centralized digital repository. To do this, use a contract management system or cloud storage solution with encryption and access controls.
Organize your loan agreements: Organize loan agreements by borrower name, loan type, or date to facilitate easy retrieval. Use a consistent naming convention for digital files, or benefit from a fully searchable contract repository.
Track all amendments: Maintain an audit trail that records any modifications, access, or actions taken on the loan agreement. This is made simple when you use a tool like Juro.
2. Monitor repayment schedules
Schedule reminders for payments: Set up automated contract reminders for upcoming payment due dates, using calendar tools or specialized software. This helps both the lender and borrower stay on track with payments and avoid a breach.
Track received payments: Keep detailed records of each payment made, including the date, amount, and method of payment. Cross-reference these records with the repayment schedule in the loan agreement to ensure accuracy.
Send payment confirmations: Send confirmation notices after each payment is received, detailing the remaining balance and next due date.
Regularly update calculations: If the loan has a variable interest rate, regularly update the borrower on rate changes and how they affect payment amounts.
3. Address delinquencies and defaults
Follow late payment procedures: If a payment is late, follow the procedures outlined in the agreement, such as applying late fees or adjusting the repayment schedule.
Manage defaults: If the borrower defaults, take steps as defined in the agreement, such as accelerating the loan, seizing collateral, or initiating legal action.
Enter into renegotiations: Consider negotiating new contract terms if the borrower is facing financial difficulties. This can help recover the loan without resorting to legal measures.
4. Prepare for loan maturity and closure
Notify parties of final payments: As the loan nears its end, notify the borrower of the final payment amount and due date.
Release the collateral: If the loan was secured, release the collateral upon full repayment and provide the borrower with documentation confirming the loan’s closure.
Finalize all documentation: Once the loan is fully repaid, finalize the loan agreement by marking it as closed in your records. Issue a formal closure letter to the borrower.
By following these steps, you can effectively manage loan agreements, ensuring that both parties fulfill their obligations and that any potential issues are addressed promptly and professionally.
This proactive approach helps in maintaining a positive relationship with borrowers and minimizes the risk of financial loss in the months and years to come.
With Juro, it’s even easier to create, negotiate, sign, track, and store loan agreements.
Juro’s AI-native platform automates repetitive tasks involved in contract creation and management. This includes drafting standard contract clauses, highlighting key terms and suggesting edits. By reducing the manual effort required, legal and business teams can focus on more strategic activities, accelerating the entire contract lifecycle.
Browser-based contract collaboration
Our software fosters seamless collaboration across teams within a single, browser-native workspace. This eliminates the need for multiple platforms and reduces the chances of miscommunication or lost documents. Teams can negotiate, edit and approve contracts in real-time, ensuring faster turnaround times.
Self-serve workflows
Juro enables business teams to self-serve on legal agreements directly from the tools they already use. This feature reduces the dependency on legal teams for routine contract tasks, freeing up legal professionals to handle more complex issues.
Centralized contract repository
Storing all contracts in Juro’s data-rich contract repository provides a wealth of insights into contract performance and risks. Its centralized system makes it easy to search for and retrieve contracts, monitor compliance, and analyze contract data to inform business decisions.
Enhanced visibility and tracking
Juro’s platform offers robust tracking and analytics features, giving teams visibility into the status of each contract at any stage. This transparency helps in identifying bottlenecks and resolving issues swiftly, further speeding up the contract management process.
Benefits of using Juro for loan agreements
By leveraging Juro's contract automation software, businesses can significantly reduce the time and effort involved in managing contracts, leading to faster execution, improved compliance and better overall efficiency. The benefits of using Juro include:
Deals closed faster: Accelerating the agreement process helps businesses close deals faster.
Reduced costs: Automating contract management mitigates the risk of human errors, reduces the need for extensive legal oversight, and ensures no missed contractual obligations like renewals.
Improved compliance: A centralized, secure repository makes it easier to ensure that all agreements comply with relevant laws and regulations.
That’s why modern businesses like yours use Juro to power 2m+ contracts, with companies like Trustpilot, Deliveroo, Remote, TheRealReal, and AngelList making Juro the default way to manage contracts.
Modern businesses use Juro to automate contracts from drafting to signature and beyond, in one intuitive platform that every team can use. Want to see how?
Modern businesses use Juro to automate contracts from drafting to signature and beyond, in one intuitive platform that every team can use. Want to see how?
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