Loan Agreement Forms

Written by Helen Glenn Court
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Debt financing is something most of us live with in one way or another, whether it's a home mortgage, a student loan, a credit card minimum, an auto payment, or a business loan. "Cash on the barrelhead" is rarely a way of life anymore. Instead we look for the loan agreement form most suited to our needs, or read carefully through and ask for a lawyer for advice before signing.

Whether business or personal, most loans are either long-term or short-term, and either fixed rate or variable rate. In the marketplace there is also equity capital, but that's not an amount to repay, but an exchange for selling your interest in a business. The factors that distinguish long- and short-term loans are where the money will come from to repay the loan and how much time you have to repay it. The other loan types are the fixed and variable rate--the first being longer term and the second shorter term.

At the low end on the business side are the short-term loans, which range form 90 days to three years. Start-ups and small businesses, because they're a greater risk, usually qualify only for short-term agreements. Short-term loans are generally appropriate for needs like building inventory or financing to cover an accounts receivable ledger. Long-term loans typically cover expenses like business expansion or acquisition, industrial equipment, business property investments, and the like.

Loan Agreement Paperwork

Whatever the loan need or arrangement, having the appropriate loan agreement form is critical. Use the wrong form, or sign the wrong form, and you could end up facing a legal or financial migraine. A loan agreement is no different in essence than a simple personal promissory note, but it is more complex, so using a form created by professionals can ease your concerns.

The basic issues that an agreement should cover if you want to avoid a migraine include the due date, interest payments, collateral, fees, defaults, and grace period. It's important to remember that because there is no such thing as a typical loan, there's also no such thing as a one-size-fits-all loan agreement. Each lending institution or bank will have their own complex form. Understanding the line items on a loan agreement form is critical.

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