Free Loan Agreement Generator

Use the form below to generate a free loan agreement for unsecured lending between companies. If you want to lend and take security over assets to protect against the risk of borrower insolvency, you’ll need to get legal advice.

Create your Free Loan Agreement

Fill in the form below to have a free customised Loan Agreement emailed to you in Word format. No credit card, sign-up or subscription needed.

Enter the full legal name of the company providing the loan.

Provide the complete registered address of the lending company, including street, city, and postcode.

Enter the full legal name of the company receiving the loan.

Provide the complete registered address of the borrowing company, including street, city, and postcode.

Specify the date on which this loan will be made. This will be the effective date of the loan agreement.

Specify the total amount of money being loaned. Include the currency (e.g. GBP or USD), and commas between the thousands.

Enter the interest rate percentage that will be applied to the loan annually. E.g. if 5% interest on a loan of £100,000 there will be £5,000 interest payable per year. How often this interest must be paid is set in the next question.

If you want 0% interest, write "zero" in the box instead of "0".


Select how often the interest should be paid.

Describe the specific purpose for which the loan amount will be used.

"The Borrower agrees to use the Loan exclusively for..."

Specify the date by which the loan amount and any not already paid accrued interest should be fully repaid.

Enter the email address you want us to send your contract to. This may take a couple of minutes to arrive.

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Guide to Loan Agreements

Companies in England and Wales, like elsewhere, may find themselves in situations where they need to either lend or borrow funds to meet various operational demands. In such instances, a loan agreement this can be a vital tool. This article delves into the nuances of loan agreements, focusing on unsecured loans between companies, exploring how to implement these agreements effectively, safeguarding interests without security, the enforcement of such agreements, and the role of legal professionals in taking security.

What is a Loan Agreement

A loan agreement is a legal contract between two parties, the lender and the borrower, outlining the terms and conditions under which the loan is made. It specifies the loan amount, interest rate, repayment schedule, and the obligations and rights of both parties. In the context of business, especially between companies, these agreements ensure that there is a formal record of the loan, which can help in avoiding misunderstandings and disputes in the future.

Unlike personal loan agreements, company-to-company loan agreements often involve larger sums of money and more complex terms. They are essential for providing a clear framework within which the financial transaction will occur, ensuring both parties are clear on their responsibilities. Such agreements are particularly important in transactions without a financial intermediary, such as a bank, where the level of trust and risk involved is significantly higher.

When drafting a loan agreement, it is crucial to include all pertinent details to ensure it is enforceable. This includes the names of the parties, the loan amount, interest rates, repayment terms, and any other conditions or covenants. Clarity and comprehensiveness in drafting these agreements cannot be overstated, as they form the legal backbone of the loan transaction.

Understanding Unsecured Loan Agreements

Unsecured loan agreements differ from their secured counterparts in that they do not require the borrower to provide collateral against the loan. This inherently increases the risk for the lender, as there is no asset to claim should the borrower default on the loan. However, unsecured loans are common in company-to-company transactions, often based on the strength of the borrowing company’s balance sheet, its reputation, and the relationship between the companies.

The absence of collateral does not mean that unsecured loans are without recourse. Lenders may look into other safeguards, such as personal guarantees from company directors or comprehensive credit checks, to mitigate risk. Additionally, the interest rates for unsecured loans may be higher, reflecting the increased risk assumed by the lender.

For businesses in England and Wales, understanding the implications of entering into an unsecured loan agreement is crucial. It requires a balance between the trust in the borrowing company’s ability to repay the loan and the inherent risk of such arrangements. Legal advice is often sought to navigate these waters, ensuring that the agreement protects the lender’s interests as much as possible without collateral.

Implementing Your Company-to-Company Loan

Implementing a company-to-company loan begins with due diligence. Both parties should thoroughly vet each other’s financial health and the specifics of the proposed transaction. This includes reviewing financial statements, assessing creditworthiness, and agreeing on the loan’s terms. Clear communication and transparency are key in setting the stage for a successful loan agreement.

Once due diligence is completed, drafting the loan agreement is the next step. Utilizing a free loan agreement template can be a starting point, but customization may be necessary to address the specific needs and concerns of both parties. It is advisable to involve legal counsel to ensure that the agreement is compliant with current laws and regulations, and that it accurately reflects the agreed-upon terms.

After drafting, the agreement must be signed by authorized representatives from both companies. This formalizes the contract, making it legally binding. A well-drafted and executed loan agreement sets clear expectations and provides a legal framework for recourse should disputes arise.

Safeguarding Interests without Security

Safeguarding the interests of a lender in an unsecured loan agreement requires creativity and diligence. Incorporating stringent covenants into the agreement can serve this purpose. These might include financial ratios the borrower must maintain, restrictions on further indebtedness, or requirements for regular financial reporting. Such covenants provide early warning signs should the borrower’s financial health deteriorate.

Another method is the inclusion of a material adverse change (MAC) clause, which gives the lender the right to call in the loan if there is a significant deterioration in the borrower’s financial condition. Additionally, setting up a sinking fund, where the borrower regularly sets aside funds for eventual repayment of the loan, can offer some reassurance to the lender.

Despite these measures, the inherent risk in unsecured lending cannot be completely eliminated. Therefore, both parties must thoroughly assess the risks and benefits before entering into such arrangements. For the lender, understanding the borrower’s business model and market position can provide additional comfort.

How do I enforce a Loan Agreement?

Enforcing a loan agreement, should the borrower default, begins with the terms outlined in the agreement itself. The first step often involves issuing a formal notice of default to the borrower, providing them with an opportunity to remedy the situation. If the borrower fails to rectify the default, the lender may then pursue legal action to recover the owed funds.

In England and Wales, the process of enforcing a loan agreement may involve litigation or arbitration, depending on the terms of the agreement. Litigation can be costly and time-consuming but might be necessary to recover the loaned funds. Arbitration, on the other hand, can be a quicker and less expensive alternative, though both parties must agree to this method in the contract.

It’s important to note that the lack of physical collateral in an unsecured loan can make enforcement more challenging. The lender may need to prove the borrower’s ability to pay and may only recover funds through the borrower’s liquid assets or future earnings, which can be uncertain.

Secured Lending

This free loan agreement isn’t secured, but the concepts are useful to understand and are explained below. Contact us to get a quote for an expert lawyer to help you with secured lending or borrowing.

What is security in lending?

Security in loan agreements in company-to-company lending refers to collateral or assets pledged by the borrowing company to the lending company as a form of protection against default on the loan. If the borrower fails to repay the loan, the lender has the right to seize the pledged assets to recover the owed amount.

Taking Security – How Lawyers Can Help

While this article focuses on unsecured loans, companies may sometimes decide to take security to mitigate risk. In such instances, legal professionals play a crucial role. They can advise on the type of security that best suits the transaction, such as a charge over assets, a debenture, or a personal guarantee, and ensure that it is properly documented and enforceable.

Lawyers can also conduct due diligence on the borrower, identifying any existing claims or charges on the borrower’s assets that may affect the lender’s position. This is vital for informed decision-making and risk assessment.

Moreover, legal experts can help navigate the complex regulatory environment governing secured transactions. This includes the registration of charges with Companies House, a requirement under UK law, which makes the security enforceable against third parties. Legal advice is indispensable in ensuring that the process is handled correctly and efficiently.

Navigating the intricate landscape of company-to-company loans, particularly unsecured ones, demands a comprehensive understanding of legal and financial principles. For businesses in England and Wales, leveraging free loan agreement templates can be a starting point, but it is the customization, implementation, and enforcement of these agreements that truly safeguard interests and ensure the viability of such financial arrangements. Whether through meticulous drafting of loan agreements, strategic enforcement practices, or the judicious use of legal counsel for taking security, companies can manage risk and foster successful financial partnerships. In the dynamic world of business finance, these practices not only protect but also enable growth and innovation.

Types of Security in Company-to-Company Lending

When a company lends to another, it often seeks security to mitigate the risks associated with the loan. Security provides a lender with a way to recover the loaned funds if the borrower defaults. Below are various types of security that can be taken in such transactions.

These types of security are not covered by this basic template, as they require separate specialist documentation and drafting to ensure the security is valid. Contact us for a quote for us to help you arrange a loan with security.

Fixed Charges

A fixed charge is attached to specific, identifiable assets such as property, machinery, or equipment. The borrower cannot sell these assets without the lender’s consent, providing the lender with a direct claim on the asset if the borrower defaults.

Floating Charges

Contrary to fixed charges, floating charges are not attached to specific assets but cover a pool of assets, such as inventory or accounts receivable. This charge ‘floats’ until an event like default occurs, at which point it ‘crystallizes’ and becomes a fixed charge on the assets in the pool at that time.


A pledge is a form of security where the borrower provides the lender with possession of certain assets but retains ownership. If the borrower defaults, the lender can sell these assets to recover the owed amounts.


In a mortgage, the borrower transfers interest in real property to the lender as security for the loan. The borrower retains the use of the property, and the interest is returned upon full repayment of the loan.

Guarantees and Personal Guarantees

A guarantee involves a third party agreeing to fulfill the borrower’s obligations if they default. A personal guarantee is a commitment by an individual, often a company director, to repay the loan personally if the borrower defaults.

Assignment of Receivables

This security involves the borrower assigning its future receivables or income to the lender. If the borrower defaults, the lender has the right to these incoming funds.

Convertible Securities

Convertible securities are bonds or preferred stock that the lender can convert into a predetermined number of the borrower’s common shares, typically after a specified date or event.


A warrant gives the lender the right to purchase equity in the borrowing company at a set price before the warrant expires, providing an alternative way to recover the loan if the company’s value increases.


Derivatives, like futures and options, can be used as security. They are financial contracts whose value is derived from an underlying asset, index, or interest rate, offering risk management options.

Credit Default Swaps (CDS)

A CDS is a financial derivative that allows the lender to swap or offset their credit risk with another party. It’s essentially insurance against the borrower defaulting.

Equity Pledges

In an equity pledge, the borrower pledges its shares in the company or a subsidiary as security, giving the lender a claim on these shares in the event of default.

Revenue Pledges

With a revenue pledge, the borrower secures the loan against specific revenue streams, like future sales or income, ensuring the lender has a claim on these funds if the borrower fails to meet its obligations.

Letters of Credit

A letter of credit is a guarantee from a bank that the borrower will fulfill their contractual obligations to the lender. If the borrower defaults, the bank will cover the outstanding amount.

Bank Guarantees

Similar to a letter of credit, a bank guarantee is a promise from a bank to cover a borrower’s debts up to a certain amount if the borrower fails to repay the loan.

Syndicated Loans

In a syndicated loan, multiple lenders provide funds to the borrower. Each lender’s risk is reduced as they only contribute a portion of the total loan amount.

Mezzanine Debt

Mezzanine debt combines elements of debt and equity financing, often secured with the equity or ownership interests in the company. It is subordinated to other debts but offers lenders the potential to convert to equity in case of default.

Each of these security types offers different levels of protection and risk, and the choice depends on the specific circumstances of the loan, the relationship between the companies, and the financial stability of the borrower. Legal advice is crucial to ensure that the chosen security is appropriate and enforceable under UK law.

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