Our experienced loan agreement lawyers can help you understand and negotiate your loan agreement so you can focus on running your business.
Types of loan agreements
A loan agreement is a formal contract that you enter when borrowing money. Whether a family member is helping you grow your business or you’re borrowing money from a lending institution like a bank, you should have a loan agreement in place.
There are several different types of loans that you can take out, and these will affect what you need to consider in your loan agreement. Types of loans include:
- Secured loans, which are when you use property as collateral for the loan. These are often used when you’re purchasing a building or an asset, as the building can be used to secure the loan. Examples of secured loans include mortgages and many types of car or asset finance loans;
- Unsecured loans do not use any asset for collateral. This means they often have a higher interest rate and may be used to finance long or short term business requirements;
- Overdrafts are often provided by financial institutions. They allow you to use more money than you have available in your account so you can cover short term cash flow issues;
- Line of credit is usually used if you need to progressively draw down funds for a project or acquisition. It gives you the ability to call on the funds over time as and if you need them.