Loan Agreements & Debenture Agreements

Banks and payday lenders are far from the only organisations that offer loans these days. In the current climate of strict lending criteria people are turning to other avenues to obtain much credit when a need arises. If your business is in a position where it is considering giving a loan, perhaps to a member of staff or another party, it is incredibly important to ensure a Loan Agreement is drafted correctly and in place. This will help to avoid any misunderstandings over the terms of the loan and ensure your business is protected against both expected and unforeseen risks and is enforceable in the event of an issue.

If you are providing a loan to another party and want to make sure you are legally protected but would prefer to avoid the cost of having a solicitor draw up the agreement there are legal templates available that act as a cost effective solution. These are comprehensive, legally binding and completely up to date with current UK law. Costing as little as £13 they can be an economical alternative to costly legal representation.

A Loan Agreement needs to cover a number of different aspects in order to be fit for purpose. This includes the amount, purpose, rate of interest, repayment schedule, any applicable guarantees, costs and what happens in the event of a default. These are just a few of the clauses that need to be part of the agreement, but there are a number of others.

In addition to the Loan Agreement you will also need a Debenture Agreement. This is a document that will protect the sum your business is advancing by providing security. The security is provided by the borrower and the Debenture Agreement details the charge that will be taken as security for the sum that is being borrowed.

When a company takes security in the UK it comes with certain requirements. It has to be registered at Companies House and if land is involved it may also need to be registered at the Land Registry. Because the business that is acting as a lender has a hold or charge over the asset, their interest must be registered so that it cannot be sold without their knowledge or agreement. This is important as it protects the lender. Also, if the borrower was to be declared insolvent at some point the Debenture Agreement would ensure the lender had rights as a creditor. A copy of the Debenture Agreement needs to be sent to Companies House and the Land Registry within 21 days of the security being taken. In addition, Companies House will want to receive a copy of the Loan Agreement and the Form MR01.

Further information on both Loan Agreements and Debenture Agreements can be found at The Legal Stop – an online business providing high quality affordable legal and business document templates.