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Commercial loan agreement and facility agreement templates
We have a range of secured and unsecured business loan agreement templates, facility agreements and related documents.
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As an alternative to raising money by capital investment for shares in the company, a business may raise money by borrowing.
What are the different types of commercial loan?
- term loan: a loan for an upfront amount of cash repayable either in full on a specified due date for repayment or in instalments
- loan facility: an arrangement under which a lender agrees to provide one or more loans to a borrower for a period of time and up to specified maximum loan amount
Business loans can either be:
- unsecured: the repayment of the principal and interest and the other obligations of the borrower are not secured over any of the property or assets of the borrower or of another person. In case of a default or insolvency of the borrower, the lender will be an unsecured creditor
- secured: the repayment of the principal and interest and the other obligations of the borrower are secured over some or all of the property or assets of the borrower or of another person. In case of an insolvency or the borrower defaults, the lender will have a power to possess and sell the secured property or assets. The lender will be a secured creditor, with priority over unsecured creditors on an insolvency
- guaranteed: a guarantee may be given by:
- another company, including a parent company or subsidiary
- an individual, including a director or shareholder
This section includes different types of loan and facility agreements together with related documents including board minutes of corporate borrowers. For forms of guarantee, including a corporate guarantee or a personal guarantee, see Guarantee.
Why use a facility agreement?
A facility agreement is an arrangement under which a lender agrees to provide one or more loans to a borrower for a period of time and up to specified maximum loan amount. A facility agreement may be unsecured or secured.
Subject to the borrower continuing to comply with the facility agreement, including the repayment obligations and payment of interest at the agreed interest rate, the lender is committed to provide future loan advances to the borrower under the facility. This enables the borrower to borrow money (and start to pay interest on the amount advanced) on an as and when needed basis. In exchange for the commitment to lend money when requested, the lender and the borrower may agree that the lender will be paid a commitment fee equal to a percentage of the undrawn facility.
