Loan agreement

A loan agreement is a method of finance that provides for a loan by one party (the lender) to another party (the borrower).

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Loan agreement information

The agreement may provide for the loan to be either secured or unsecured. Under a secured loan, the borrower offers an item of value (for example, a house or bonds) that the lender can sell if the loan is not repaid. An unsecured loan is riskier, as nothing of value is provided by the borrower in the event that they fail to make the repayments. Security (that is not real property) can be registered on the Personal Property Securities Register, providing additional protection to the lender in the event of bankruptcy or insolvency of the borrower.

A loan agreement is necessary in order to prove that the loan was not intended as a gift, and that it requires repayment. As such, the agreement should be in writing and signed by the parties. If one of the parties is a corporation, rules in the Corporations Act make provision for a company to sign a document via its director(s) and/or secretary.

At Lawbase, we understand the importance of raising finance for small businesses. If you would like us to draft a customised loan agreement for your business, please get in touch with us today.

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