Free Business Loan Agreement Template

A business loan agreement is a written contract setting out the terms on which one party lends money to a business and the business agrees to repay it.

It covers the amount, the interest, the repayment schedule, and what happens if payments are missed. Both the lender’s rights and the borrower’s obligations are recorded in one document.

The agreement is used well beyond bank lending. Loans from a director, a family member, an investor, or another business all benefit from being documented, and informal business lending is exactly where disputes tend to arise.

Writing it down protects both sides. The lender has a record of what is owed and on what terms, and the borrower has certainty about what is expected and when.

Document any business loan of consequence, regardless of the relationship between the parties. Common situations include:

• A director or shareholder lending money into their own company.
• A family member or friend funding a business.
• One business lending to another, including within a group.
• A private lender or investor providing debt rather than equity.
• Formalising an existing informal advance that was never documented.
• Any loan where repayment runs beyond a few months.

Loans between related parties deserve more documentation rather than less. They are the ones most often undocumented, and the ones where a later disagreement is hardest to resolve without a written record.

The document should leave no room for disagreement about the numbers or the dates.

The Parties

Full legal names of lender and borrower, including the exact legal entity and its registration details.

Loan Amount and Disbursement

The principal, when it is advanced, and how.

Interest

The rate, how it is calculated, and when it accrues. State clearly whether the rate is fixed or variable.

Repayment Schedule

Instalment amounts, frequency, start date, and final maturity date.

Prepayment

Whether the borrower may repay early, and whether any charge applies.

Security or Collateral

Any assets pledged, described precisely, and what happens to them on default.

Guarantees

Whether any individual is personally guaranteeing the debt.

Default and Remedies

What counts as default, any cure period, and what the lender may do.

Governing Law and Signatures

Which law applies, plus signature blocks and the date.

Lenders frequently ask a business owner to guarantee a company loan personally, and this is the term borrowers underestimate most.

A personal guarantee removes the separation between the business and the individual for that debt. If the company cannot pay, the lender can pursue the guarantor’s own assets, which can include savings and in some circumstances a home.

Read what the guarantee actually covers. Whether it is limited to a fixed sum, whether it extends to interest and costs, and whether it survives the sale of the business all vary and all matter.

Consider whether the guarantee can be capped or released. A limit, or a release once certain conditions are met, is a reasonable thing to negotiate before signing rather than after.

Tip: Anyone being asked to guarantee a business debt should take independent legal advice, separately from the business. The guarantor’s interests and the company’s are not the same, and this is a commitment that outlives most business relationships.

Several parts of a loan agreement are governed by rules that vary considerably by jurisdiction.

Interest rates can be regulated. Limits on the rate chargeable, how it must be disclosed, and how it is calculated differ by place and sometimes by the type of lender, and an unenforceable rate provision can affect the wider agreement.

Security usually requires more than a clause. Where assets are pledged, taking effective security often involves registration or filing steps outside the agreement itself, and skipping them can leave a lender unsecured in practice.

Lending itself can be a regulated activity. Depending on who is lending, to whom, and how often, licensing or disclosure obligations may apply.

Tax treatment matters on both sides. Interest income, deductibility, and related-party lending rules all have consequences worth understanding before the money moves.

Take advice from a lawyer and an accountant in your jurisdiction before finalising a business loan agreement. Nothing here states any rate limit, registration requirement, or licensing rule.

A business loan agreement takes about an hour once the commercial terms are settled. Document Genius walks you through each section with simple questions.

1. Confirm the Exact Legal Entities

Get the borrower’s full registered name and details right, not a trading name.

2. Settle the Numbers

Principal, rate, instalment amount, frequency, and maturity date.

3. Deal With Security and Guarantees

Describe any collateral precisely, and identify any guarantor.

4. Define Default and Remedies

Say what counts as default and what follows.

5. Have It Reviewed

A lawyer should check interest, security, and enforcement provisions before signing.

6. Sign, Date, and Keep Records

Both parties keep an executed copy, and the lender records every payment. Start yours now and have a draft ready for review.

What happens next is mostly administrative, and doing it properly is what makes the agreement useful.

Keep a payment record. A running schedule showing each payment, the date, and the outstanding balance settles most disagreements before they start.

Put any variation in writing. Payment holidays, extended terms, and reduced instalments agreed verbally are exactly what parties later remember differently.

Communicate early if repayment becomes difficult. Most lenders would rather renegotiate than enforce, and a borrower who raises a problem in advance has far more room than one who simply misses a payment.

Confirm the loan is discharged. When the final payment is made, get written confirmation and release any security, so the record is clean.

Nothing here is legal, tax, or financial advice. Have a qualified professional in your jurisdiction review any loan agreement before it is signed.