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Loan Agreement

A Loan Agreement is a legally binding document outlining the terms, conditions, and obligations of a loan between a lender and borrower. It details repayment schedules, interest rates, security, covenants, and consequences of default. Loan Agreements apply to facilities such as Business Loans, Working Capital Loans and Business Lines of Credit.

Why Loan Agreements Matter

Loan Agreements protect both borrower and lender by clearly defining obligations, repayment terms, and penalties. For SMEs in the Tradie Hub, Truckie Hub, Café Hub, and Whitecoat Hub, understanding the loan agreement helps avoid default and keeps cashflow predictable.

  • Clarifies interest rates, repayment schedules, and loan term
  • Specifies collateral and covenants
  • Outlines lender and borrower rights and responsibilities
  • Reduces risk of disputes and financial mismanagement

How Loan Agreements Work

  • Lender and borrower negotiate terms including principal, term, interest, and security.
  • The agreement is drafted and signed by both parties.
  • Borrower draws down funds as agreed under the facility.
  • Compliance with terms, covenants, and repayment schedule is monitored.
  • Any breach may trigger default clauses or early termination rights.

Loan Agreements interact with terms like Early Termination, Loan Covenant, Payout Figure, and Exit Fees.

Related Switchboard Resources

Official info: business.gov.au

What is included in a loan agreement?
Details of principal, interest, repayment schedule, covenants, collateral, and default clauses.
Is a loan agreement legally binding?
Yes — once signed, it is enforceable under Australian contract law.
Can terms be renegotiated?
Yes — borrowers may negotiate refinancing, amendments, or restructuring subject to lender approval.