Who’s this Loan Agreement for?
This short-form Loan Agreement is perfect where the borrower intends to use the loan for business or investment purposes. Whether it's for working capital, purchasing new equipment, expanding into new markets, or funding a business acquisition, this agreement sets clear expectations.
The agreement is designed for scenarios where the lender does not regularly lend money, and the loan is for business use only (not personal use, such as buying a car or paying for house renovations). In that case, the lender has additional responsible lending obligations under the Consumer Credit Contracts and Finance Act 2003 and this loan agreement will not be suitable.
This Loan Agreement assumes a single lender (a company, sole trader, trustees of a trust, partners in a partnership, or two or more people) and a single borrower (a company or a sole trader).
Why do you need a Loan Agreement?
If a significant amount of money is being loaned (or the parties are not closely related), having a clear, written agreement helps avoid misunderstandings or disputes. It ensures both the lender and borrower fully understand their rights and responsibilities and protects both parties legally.
What does the Loan Agreement cover?
This Loan Agreement clearly outlines the terms and conditions of the loan, including the loan amount, interest rate, repayment schedule, and any other obligations.
Guarantee: It includes an optional guarantee clause. If a third party guarantees the borrower's obligations, they promise to repay the loan in full and on time and fulfil any other borrower obligations under the agreement if the borrower defaults. This offers additional assurance to the lender, especially when there's uncertainty about the borrower's ability to repay. If there’s more than one person acting as the guarantor, all guarantors will be responsible for full repayment of the loan (not just a share of the loan amount).
Security: To provide extra security, the agreement contains an option to secure the loan with collateral. The collateral could be a specific asset (such as shares, equipment, machinery, debts, real estate, or intellectual property) or all assets the borrower owns. If there's a default, the lender can seize and sell the collateral to recover the debt. This is particularly useful in high-risk scenarios or when a substantial loan amount is involved.
If security is required, you will need a separate security agreement between the borrower and lender. You will need to consult a lawyer to have this prepared for you. The security agreement will vary depending on the nature of the collateral. This Loan Agreement does not include the terms required for the borrower to grant security over collateral.
How long will it take to create my Loan Agreement?
Around 15 minutes! During the Q&A you can save your progress to come back later, or repeat the Q&A to change an answer or produce a new version of a document.
What information do I need to complete the Q&A?
- Name and contact details of the lender, borrower and any guarantor
- Loan amount
- Interest rate (if interest is payable) and default interest rate
- Repayment dates and amounts (regular or irregular payments, or repayment on demand)
- Whether a guarantor is guaranteeing repayment of the loan and other obligations of the borrower
- Can the borrower prepay the loan early without penalty (ie, before the repayment date(s))?
- Will the borrower provide security (sometimes called collateral) to secure loan repayment?
- What financial information the lender requires the borrower to provide (such as financial statements) to assess its ongoing ability to repay the loan (if any)
What if I need help?
On Your Terms has teamed up with Luminate Legal to offer its customers the option of obtaining legal advice from a lawyer to provide extra assurance and peace of mind. If you would like to ask a lawyer some quick questions about your documents (or your responses to the Q&A), or have your document reviewed/edited by a lawyer, click here to view and select Luminate Legal's packages and fixed-fee pricing exclusively for On Your Terms customers.
What do I do once I've created my Loan Agreement?
- Download your loan agreement and check all the details are correct.
- Your document will be in MS Word form, so you can edit and brand it as you wish.
- All parties should be given sufficient time to read and understand the Loan Agreement and take legal advice if they wish.
- All parties must sign for it to be legally enforceable. For signing advice, read our helpful blog here. Make sure the Loan Agreement is dated.
- Keep a copy of the signed Loan Agreement in a safe place.
- If the lender is a person (or persons) rather than a company and dies before repayment is complete, the borrower will owe the debt to the lender's estate. The lender needs to update their Will after signing the loan agreement to specify how they want to deal with the loan in the case of death.
We strongly recommend the lender require all guarantors to obtain independent legal advice (from a lawyer who is not acting for the borrower or lender) before signing. They must understand the terms and responsibilities associated with guaranteeing this loan. Guaranteeing a loan can have significant financial consequences. A guarantor needs to ensure it has the financial means to repay the loan without causing financial hardship to itself. Failure to repay the loan may result in legal action and damage to the guarantor's credit history.
Other helpful information:
- Check out our blogs and guides: Do I really need T&Cs?, Who can sign legal documents in New Zealand?, How to transfer shares in a New Zealand company
- You may also find these bundles or documents useful for your business: Online Services Sales Essentials Bundle, Online Product Sales Essentials Bundle, Coaching or Online Courses Essentials Bundle, Consultancy Services Essentials Bundle, Independent Contractor Agreement.
- Check out our FAQs
If you’re unsure whether this Loan Agreement is what you need, reach out to us at hello@onyourterms.co.nz – we’re happy to help!
If you’re not satisfied with your purchase of this product for any reason, let us know why within 10 days of your purchase and we’ll work with you to make sure you’re happy, including giving you a full refund if necessary.
Disclaimer: On Your Terms was created to provide simplified, fast and affordable legal information and documentation access. We are not a law firm and do not provide legal advice. The information and documents we provide are general in nature, designed for common situations, and may not be suitable for your needs or circumstances. If you need legal advice, we have a network of law firm partners able to help you here.