A Commercial Loan Agreement is the basic document used by a company that lends money on commercial terms to another party (company or individual) and for a situation where a company is borrowing money on commercial terms from another company or fund. It sets out the terms and conditions under which the company is prepared to make a loan available to a borrower.
A Commercial Loan Agreement clarifies the responsibilities of the borrower and the lender, helping both parties more closely monitor the condition of the loan. This agreement can enhance a borrower/lender relationship because it encourages and promotes more frequent communications between the parties.
A well-drafted Commercial Loan Agreement is required to have a written payment plan for the borrower to repay the amount back in instalments over a predetermined time period.
When drafting a Commercial Loan Agreement, it is important to focus on a number of key clauses, in particular: