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This document can be used to record the terms and conditions of a loan made between individual persons or companies.
This document can be used for a variety of different loan types. In order to document more basic lending arrangements, consider using our Promissory Note.
Whether the loan is between friends and family or is a commercial loan between two businesses for a specific purpose, options in this Loan Agreement make it possible to provide a simple interest-free loan or add and automatically calculate interest, set a repayment schedule, add guarantors and require the borrowers to provide security for the loan.
It is also important to note that if complex terms are written into this agreement, then it may fall under the Corporations Act 2001 (Commonwealth), meaning the parties may face additional legal obligations.
In addition, in certain circumstances, if the lender is in the business of providing credit, then the National Consumer Credit Protection Act 2009 (Commonwealth) may impose additional legal obligations.
How to use this document
This document should be read carefully by the parties and the guarantors (where applicable). Every party should then sign and return a physical copy of the Loan Agreement.
Individuals should ensure that their signature of the document is witnessed by another adult person (over the age of 18).
If the borrower is providing security for the loan, then the lender may need to take further steps to rely on that security such as registering it on the Personal Property Securities Register.
Where a company is a party to this agreement they should ensure that the Loan Agreement is signed by two authorised signatories, either two directors or a director and a company secretary. Where a company only has a single director, that person may sign the agreement as the sole director.
Where the Lender has requested that the borrower provide guarantors, those guarantors should also carefully read the entire Loan Agreement and their guarantee obligations, and sign where indicated.
Seek legal advice for any assistance with these matters.
Applicable law
This agreement is subject to the broad principles of contract law.
Where the Borrower has provided security, Lenders may wish to 'perfect' that security in accordance with the provisions of the Personal Property Securities Act 2009 (Cth).
In some cases, if a loan deals with complex matters, the note may be deemed a complex financial product and may fall under the Corporations Act 2001 (Commonwealth) meaning that additional legal obligations may apply.
If a Lender is a company, and the Loan is being provided to a shareholder of that company, parties should be aware of division 7A of the Income Tax Assessment Act 1936 (Cth). Where the parties believe that division 7A applies to the Loan, they may wish to use an alternative agreement – the Division 7A Loan Agreement.
If the Lender is in the business of providing loans, the provision of the National Credit Code under the National Consumer Credit Protection Act 2009 (Cth) may apply. Lenders should review whether the provisions of that Act apply to their lending activities and ensure that they are in compliance with the rules that apply to Australian credit licence holders by tailoring this agreement accordingly.
As of 1 July 2018, the Treasury Laws Amendment (2017 Enterprise Incentives No 2) Act 2017 (Cth) may limit the effectiveness of some termination clauses, particularly in the case of insolvency events. The Australian Government has produced an explanatory memorandum in relation to this legislation.
If in doubt, the parties should seek legal advice.
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Other names for the document: Acknowledgement of Debt, Acknowledgment of Loan, Agreement for Repayment of Loan, Agreement to Lend Money, Agreement to Loan Money
Country: Australia