Unsecured Loan Agreement Template

The purpose of the agreement is to record the terms of the loan between the borrower and the lender. As a lender you will want to lend money for the best return available and minimum risk. As a borrower your objective is to obtain funds with a degree of flexibility and the lowest possible cost. This agreement can be tailored either way and will provide you with a contractual framework for you to evidence the loan and set out the terms upon which the loan is made. Agreements are easier to enforce so you are best placed putting it in writing so it is clear from the start it is a loan and not a gift!


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Step-by-step guide

1. This identifies the parties to the Agreement. Here we have two companies identified by company number as well as name. This can be changed to individuals if you are not a registered company but remember to include full names and addresses.

2. Here we have a narrative of the background and the purpose of the Agreement being that the money will be lent subject to a number of terms. For example the loan carries interest, the applicable rate and what would happen if the money was not paid back. Although the inclusion of a “Background” clause is not essential it can be a useful section to introduce unusual or complicated features.

3. This Agreement carries a Schedule which is often a handy way of recording the main details in one place. Here the loan amount as well as a short description of why the loan has been taken out are included. Where the loan is repayable in instalments, the arrangements are set out clearly in the Schedule. It could be tailored to your particular requirements. So if the loan is repaid by a one-off repayment a fixed date is listed for this. Alternatively perhaps your loan is repaid on the happening of a certain event. This could be listed. Here the lender reserves the right to withhold payment of loan monies to the borrower if certain occurs which we look at below.

4. Interest is referenced here and later described in the Schedule. Interest could be based on a variable rate that will typically be a specified bank’s base rate (which may vary on a daily basis). You could also consider a fixed rate for the term of the loan.

5. Repayment is dealt with either by a one-off or “bullet” repayment or instalments as described in the Schedule. Repayment is made without any deductions being made by the borrower unless they have a legal reason to do so.

6. It is important to ensure that the borrower has sufficient assets to enable them to repay the loan and there is nothing going on in the background that could prevent them from meeting their repayments.

7. Here the lender can lay down a number of obligations on the borrower to ensure that the loan and any interest are repaid. The main one here is an obligation on the borrower to submit various financial statements at particular intervals and also an assurance that there is no adverse material change in the borrower’s circumstances which would prevent them from making repayments.

8. If certain events occur the lender can stop lending any more money to the borrower. As well as making loan and interest repayments the lender is liable to also pay the borrower’s costs of enforcing this Agreement and recouping their monies. This clause can be tailored to your particular requirements.

9. We end with the general provisions that appear in most legal agreements with a signing clause to finish.

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Document drafted by:

Clive Rich LawBrief

Clive Rich is a highly experienced entertainment and digital media lawyer, who has also successfully run digital businesses for companies such as Sony and Bertelsmann.

A qualified barrister, he has been a lawyer for almost 30 years and has drafted and crafted contracts for a broad spectrum of multi-nationals, major organisations and brands, including Yahoo, Apple, Napster, SanDisk, Myspace and the BBC.

He has also previously run his own legal practice, Rich Futures Ltd in association with the Top 30 UK law firm, Olswang LLP, representing a variety of technology companies and SMEs.

Clive is a qualified Mediator through the Centre for Effective Dispute Resolution (CEDR) and a qualified Arbitrator through the Central Institute of Arbitration (CIArb) in London.

As a negotiator, he is the author of “The Yes Book: the Art of Better Negotiation”, published by Random House in March 2013. Clive has also designed and successfully launched a negotiation App called “Close My Deal”, enabling people to understand the basis of successful negotiation and apply the skills to everyday scenarios. He has provided negotiating coaching and deal making services to a wide range of large organisations and SMEs. He has also been a board member of a number of digital SMEs.

Clive is a devoted father and husband, but when he is not spending time with his family, he likes to unwind by playing golf or watching a variety of sports (football, rugby, cricket). He’s a lifelong Milwall FC fan… but don’t hold that against him!

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