Even though talking about funds can be pretty tricky, especially when borrowing and lending are involved. But when you have a project in mind that might cost you a lot, you have to strike up a deal to receive the necessary funding. This is where business loan agreements come in.
Business Loan Agreements or BLAs is an understanding between a lender and a business. The promise made by the lender is to provide the funds, and the promise made by the borrower is to return the funds. The agreement helps in documenting all the contracts, which have been made between the two parties.
You need to speak with a good business agreement lawyer who can help you create the loan agreement between you and the lender. They will tell you what goes in and out of the contract and help you avoid unnecessary issues. Do you wish to know how business agreement lawyers can help in such matters? Follow the information provided in this article.
Business Loan Agreement: What Is It Exactly?
A business loan or commercial loan is a type of loan that is provided for business-related work. The business loan agreement is the document that outlines all the information of that particular loan.
The business loan is not that different from a personal loan, and the concept still hinges on the relationship between the lender who provides the money and the borrower who takes the funds and ensures to pay it back on time.
Whether it’s for business or other purposes, the loan agreement outlines how much funds an individual can borrow. It also carries the details of when the money must be returned to the lender and how much the cost of borrowing the funds.
How Can Commercial Lawyers Help Create A Business Loan Agreement?
Whether you want to make a long-term or short-term loan, a professional and qualified commercial lawyer can help you with such matters. The lawyers will provide all the essential information, which is the first step of creating this agreement.
- Doing so will allow you to easily identify the parties who agree to the terms and conditions of this contract. They will make sure that the names of both the lender and borrower are provided inappropriate places.
- Apart from that, the lawyers will also explain or provide you some insights about such agreements right before you create one. The lawyers will also explain all the benefits and risks involved within such contracts, and you should avoid all the issues and obtain all the advantages.
- On the other hand, the lawyers are well-versed with such agreements and will tell you what you should add and not.
- Taking the help of professionals will prevent you from giving birth to unnecessary problems and keep you on the right track when creating such contracts or agreements.
What Are The Things You Should Include Within A Business Loan Agreement?
Some essential things should be included within the business loan agreement or contract that you create. To know what they are, please check the information below.
1. The interest
The interest clause in a loan agreement is one of the most crucial factors because it sets out the loan’s interest rate. You will encounter two types of interest rates, which are “fixed fee rates and floating fee rates.” The floating rate is wholly based on the interest rate and benchmark rate margin, and the benchmark rate is 3%+. On the other hand, the fixed rate is created within a given number and will not change during the loan. The fixed rate is about 8%.
All loan agreements must include the repayment section so that the borrower can return the funds he/she has taken from the lender. This will make the entire agreement or contract a lot more flexible. The repayments will only be allowed when the interesting period comes to an end.
It will surely save all the payments from the breakage cost. At a certain point, the loan agreement will require some mandatory repayments as well. For such reasons, it will be much better to consult with commercial lawyers. The process will become a lot easier, and taking their help will enable you to create the loan agreement quickly.
3. Bilateral or Syndicated
You must always check the loan agreement is bilateral or syndicated. Bilateral loans are loans that are provided to the borrower from one single lender. But the syndicated loans have more than one lender who offers the loan to 2 or 3 borrowers. Bilateral loans are the pretty standard type of loans that many individuals opt for. But the loans will only become syndicated when provided by a banking institution, and the amount available as the loan is significant.
4. Events Of The Default
The most crucial factor of a loan agreement is whether the amount taken is repayable on-demand or on a fixed term. When the loan is viewed as repayable on demand, the need for events of the default term will not be required.
The lender will be free to recall the loan according to their time or will, and the borrower doesn’t have to be obliged contractually for numerous covenants. But when the long stands out to be on a fixed term, the events of default will be required.
Some of the primary events of defaults, which you must watch out for, are non-payment, insolvency, cross-agreement, and breach of the agreement.
5. Committed or Uncommitted Loan Agreements
Loan agreements can be either uncommitted or committed. When it’s a committed loan, the lender must be obliged contractually to lend the funds to the borrower after they satisfy the CPs or Condition Precedents. The CPs will get set out during the schedule of the loan agreement.
Along with that, if it’s an uncommitted loan, there will be no need for any condition precedents or CPS. To obtain a clear understanding of the uncommitted and committed loans, you must contact the commercial lawyers for it.
Creating a business loan contract or agreement might be challenging for individuals who never borrowed money from a lender before. So, to make the work straightforward, you must contact the best commercial lawyers for it. They have the knowledge, skills, and understanding of creating loan agreements for business-related purposes.