Loan Agreements

Loan Agreements

If money is being loaned, it is important to have a robust loan agreement in place setting out the terms and conditions of the loan. As well as providing certainty for both parties, this is the best way to minimise the risk of a misunderstanding or disagreement arising at a future date.

At Thornton Jones, our loan agreement solicitors have extensive experience in drafting documentation for both secured and unsecured lending. We will work with you to establish what conditions will apply to the loan and where necessary negotiate on your behalf to agree on the terms to be included.

Our commercial law solicitors have a strong understanding of the needs of businesses and individuals when dealing with loans. We will ensure that the loan agreement is tailored to your requirements and drafted in the light of your long-term commercial aims.

Our loan agreement expertise

We deal with all types of loan agreements, including:

  • Directors’ loan agreements
  • Shareholder loan agreements
  • Intercompany loans
  • Secured property loans
  • Secured lending, including third party guarantee and indemnity and charges over assets such as shares
  • Unsecured loans

Directors’ and shareholders’ loan agreements

It is common for directors and shareholders to loan money to a company, but it is crucial to ensure that this is both properly recorded and that it is clear what the money can be used for.

We can provide a contract for a loan to be made by directors or shareholders that clearly sets out the terms of the agreement and protects the borrower’s interests as far as possible.

We also deal with loans made by companies to directors, ensuring they stand up to scrutiny and that the director’s position is clear.

In addition to drafting robust loan agreements, we will also advise you on related matters such as tax implications.

Intercompany loans

An intercompany loan agreement or intracompany loan agreement deals with lending between two companies where both are part of a business group of companies, such as a company and a subsidiary.

Secured lending

We deal with lending secured against assets such as property, business assets, commercial premises and shares, ensuring that the charge is correctly registered.

We also draw up guarantee documentation for loans that are guaranteed by third parties.

Unsecured lending

Where lending is unsecured, we will advise you on the terms and conditions to include in the agreement and ensure you have robust rights to take enforcement action where necessary.

If a loan is made between family members, we will deal with the matter sensitively while still providing advice designed to protect your interests as far as possible.

Loan agreement FAQs

Who can draw up a loan agreement?

It is usually the lender’s solicitor who will draft the loan agreement. While it is possible to use a loan agreement template, this is not usually advisable as there is wide scope for errors to be made when using standard documentation and important clauses could be missed out.

The lender can set out the terms on which the money is to be lent as well as the details surrounding repayment and enforcement, should this be necessary. Our loan agreement solicitors routinely act for a wide range of lenders, taking instructions to draft a strong contract that is both clear and fair.

We also represent borrowers, advising on the terms of loan agreements and where needed we can negotiate to try to improve the terms offered.

Is a loan agreement legally binding in the UK?

Provided a loan agreement has been correctly drawn up and executed, it will be legally binding and can be enforced in the courts if necessary.

What makes a valid loan agreement?

A loan agreement is a contract and to be valid it needs to be fair and reasonable. It should clearly set out the terms of the loan and the obligations of each party.

What are the key clauses in a loan agreement?

While a loan agreement should be tailored to suit the individual circumstances in each case, it will generally contain the following key clauses:

• Details of the borrower and the lender
• The amount of the loan
• The purpose of the loan
• The period of the loan
• Repayment terms, including how much will be paid and when the payments will be due
• The rate of interest and how this will be calculated if it will vary
• Penalties for late payment and default
• Indemnities given by the borrower indemnifying the lender against losses arising in specified situations such as defaulting on payments
• Representations and warranties, or statements and guarantees made by each party about certain facts
• Default events that could give the lender the right to request early repayment of the loan
• Details of any assets offered by way of security for the loan
• Details of any guarantor

How can a loan agreement be enforced?

If a loan agreement is defaulted upon, you are entitled to take steps to recover the loan, in accordance with the terms of the agreement. It is important to follow the loan agreement in dealing with enforcement or you could be deemed to have breached the contract.

It is generally advisable to speak to the borrower to try and find out why the default has happened and find out whether it is a temporary issue. You may want to consider agreeing to a new repayment schedule. If you do, you are strongly advised to have this put into a written agreement.

Where legal action is necessary, a solicitor will be able to write an initial letter on your behalf setting out the details of what is owed and how the loan agreement has been breached. If this is not successful, you can consider going through the pre-action protocol and bringing a court claim. The correct procedure must be followed to ensure that you do not inadvertently damage your case and you are advised to seek legal advice before proceeding.

The pre-action protocol is designed to try and help parties resolve matters in advance of a court case and involves the disclosure of documents and setting out of each party’s position. Failure to follow the correct process when starting a claim can result in penalisation by the court.

Speak to our loan agreements solicitors in Garforth, Mapplewell, Ossett, Sherburn in Elmet and Wakefield today

For advice on software agreements in Yorkshire, please contact our local offices in Garforth, Mapplewell, Ossett, Sherburn in Elmet or Wakefield.

Have a quick question or want to request a call back? Use our online enquiry form.

Contact Us

☎️ Call our Wakefield office on 01924 290 029
☎️ Call our Garforth office on 0113 246 4423
☎️ Call our Sherburn in Elmet office on 01977 350 500
☎️ Call our Mapplewell office on 01226 339 009
☎️ Call our Ossett office on 01924 586 466

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