A loan agreement is a fairly standard type of document which sets out the terms of a loan and its repayment. It should be used whenever a substantial amount of money is involved, particularly if the lender and borrower are not very closely linked or wish to keep things on a more formal footing. This agreemenet should be used by all types of small business, including companies, partnerships and LLPs, Scottish general partnership and Scottish limited partnerships (SLPs), and sole traders.
Some of the principal terms contained in a loan agreement include the amount of the loan, the date by which it needs to be repaid in full along with any agreed instalment dates, and details of any interest payable.
It is also possible to add security to a loan - in which case the borrower pledges their assets (such as a house or car) as collateral for the loan. But it is recommended to Ask a lawyer for advice if entering into a secured loan, as some of the issues involved can be complex.