This Demand for Repayment of a Loan shall be used where the lender is seeking immediate repayment of the loan following an event of default under a loan agreement.
The events of default clause sets out the events or circumstances that will give the lender the right to accelerate the repayment of the loan. Please note - the lender's right to accelerate the repayment of the loan is not automatic, the lender must first send a notice to the borrower that it is seeking immediate repayment of the loan, this notice is often called a demand. Any demand must comply precisely with the notice provisions in the loan agreement.
Generally there is an ‘events of default’ clause in every loan agreement, the events of default clause sets out the events or circumstances that will give the lender the right to accelerate the repayment of the loan (i.e. declare the loan due and payable before the scheduled repayment date), cancel any further loan instalments due under the loan agreement and/or declare the loan immediately due and payable. In addition, the lender will have the right to enforce any security.
Following an events of default on the part of the borrower the lender will usually have a number of options available to it under the terms of the loan agreement. Before taking any action, the lender must ensure that the event of default has occurred and the lender is entitled to demand early repayment. Please note - wrongful acceleration (where the lender has wrongly called an event of default and accelerates the loan on this basis, or where the lender has not complied with the required formalities when seeking to accelerate the loan) may result in the lender being liable in damages to the borrower.
There may be a large number of triggering events or circumstances listed in the events of default clause. Typically, the clause would include at least the following as events of default:
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non-payment of any amount due under the loan agreement;
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breach of the financial covenants or any other obligation in the loan agreement or any security documents;
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cross-default (a default between a third party and the borrower in relation to any other financial indebtedness);
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insolvency; and
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material adverse change.
The lender is not obliged to exercise its rights under the events of default provisions and may waive the event of default for an agreed period of time or renegotiate the facility agreement. The action taken by the lender will depend on a number of factors including the nature of the event of default, the relationship between the parties and general market conditions. However, once a proper Demand for Repayment of a Loan has been made, the borrower is only entitled to the time necessary for the mechanics of payment not for the time to raise the money, and the borrower shall only be given reasonable time to make the payment.
This Demand for Repayment of a Loan template is fully comprehensive; it can be used in conjunction with our Loan Agreement template. This Document Template is in Microsoft Word format, written in plain English, easy to use and edit.
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