Lend or borrow money on written terms. Answer a few plain-English questions and Scorpia drafts the complete document for your situation, checks it with a second review pass, and shows you a free preview before you pay anything.
Draft my loan agreement — free preview →LOAN AGREEMENT
Unsecured loan between individuals, companies, or a company and its director
THIS LOAN AGREEMENT (the "Agreement") is made on __________
BETWEEN:
(1) __________ (Company Number: __________) of __________ (the "Lender"); and
(2) __________ (Company Number: __________) of __________ (the "Borrower").
BACKGROUND
The Lender has agreed to lend the Borrower the Loan on the terms of this Agreement. [The Lender is a director of the Borrower and this Agreement records a director's loan to the company.] [The Borrower is a director of the Lender and this Agreement records a loan by the company to its director, approved by the members under section 197 of the Companies Act 2006 on __________.]
AGREED TERMS
1. DEFINITIONS AND INTERPRETATION
"Business Day" means a day other than a Saturday, Sunday or public holiday in England when banks in London are open for business.
"Event of Default" means any event listed in clause 8.1.
"Interest Rate" means __________% per annum fixed .
"Loan" means the principal sum of £__________ (__________), or so much of it as is outstanding from time to time.
"Purpose" means __________.
"Repayment Date" means __________.
Words in the singular include the plural and vice versa. Headings are for convenience only. "Writing" includes email.
2. THE LOAN
(2.1) The Lender agrees to lend and the Borrower agrees to borrow the Loan on the terms of this Agreement.
(2.2) The Lender shall advance the Loan in full on __________ by bank transfer to the account nominated in writing by the Borrower.
(2.3) The Borrower shall use the Loan only for the Purpose. The Lender is not obliged to monitor or verify the use of the Loan.
(2.4) This is a single, non-revolving facility: amounts repaid may not be re-borrowed.
A loan agreement records money lent between businesses, between a company and its director, or between individuals, so that the amount, interest, repayment dates and what happens on default are beyond argument. Informal loans between friends and family are the ones most often lost; a one-page agreement prevents that.
The amount in words and figures, how and when it is advanced, the purpose, interest (fixed, variable or none), the repayment schedule as a table, whether early repayment is allowed, and what counts as default and lets the lender demand the whole balance. Default interest must be a proportionate pre-estimate, not a penalty. Payments should be made gross without set-off.
A company paying yearly interest to an individual must deduct basic-rate tax at source (section 874 of the Income Tax Act 2007). A company lending to a director or shareholder faces a section 455 charge if the loan is not repaid within nine months of the year end, and a benefit-in-kind if the interest is below the official rate; loans to directors over £10,000 need shareholder approval under section 197 of the Companies Act 2006. A one-off private loan between individuals is not regulated by the Consumer Credit Act 1974, but a person in the business of lending to individuals needs authorisation unless an exemption applies; the agreement includes the appropriate statement.
If the loan is interest-free, execute the agreement as a deed so that there is no doubt about consideration. A guarantee must be in writing and is best given as a deed with a witness. Any security over a company's assets is a separate charge that must be registered at Companies House within 21 days or it is void against a liquidator.
Yes. Choose 'individual' for both parties and no interest if that is the arrangement; the agreement is then executed as a deed with a witness.
No. An interest-free loan is fine; the draft deals with the consideration point by making the agreement a deed.
Shareholder approval if over £10,000, a written agreement, and repayment within nine months of the year end to avoid the section 455 charge. The draft includes the relevant statements.
The agreement sets events of default and lets the lender demand the whole balance, with interest and enforcement costs. Recovery is then through the courts in the usual way.
A private one-off loan is not. If you lend to individuals as a business you may need FCA authorisation; the questions ask about this.
No. Scorpia is software that drafts and checks documents. It is not a law firm and does not give legal advice. For a dispute, a company sale or anything unusual, use a solicitor.