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Elements of a Loan Agreement

• General Purpose. This form is designed to be used for simple to moderately complex loan agreements between individuals and small businesses. It is not designed for secured transactions whereby the lender is to receive a security interest in assets of the borrower.
  
• Features of this form. This form contains the following features:
  1. It allows for up to 3 different Borrowers and 3 different Lenders to be parties to the transaction;
  2. Allows the user to choose between a "demand loan" (i.e., one fully payable by the Borrower at time demand is made by the Lender) and a loan for set period (i.e., 3 years);
  3. System can calculate monthly or yearly payments due to the Lender if the user so chooses (and the loan agreement is for a specific period);
  4. System can create an amortization schedule stating the interest and principal portion of each loan payment;
  5. Allows the user to select the interest rate applicable to the loan;
  6. Allows the user to select the events of loan default and provides for remedies in the case of default;
  7. Allows the user to select state law to control contract;
  8. Allows the user to name suit location should one later become necessary;
  9. Provides for indemnification (or reimbursement) to any non-breaching party for attorneys fees and out-of-pocket expenses resulting from breach of the contract.
  Summary by the Missouri Bar Association of the various types of business entities
  
• "Choice of Entity: Corporations vs. LLCs", by John Steel
  
  
• Loan Term. In our loan agreement form, the user may choose either a "demand loan" or a loan for a specific period. A "demand loan", in our form system, is one where the Borrower must repay the entire amount of the loan (including any accrued interest) within 15 days after the Lender makes a written demand upon Borrower for payment.
  
  
• Default. "Default" means that the Borrower has not complied with the terms of the loan agreement. The most usual occurence of default is failure to may timely payments as called for in the loan agreement. However, the user may select other events that constitute default such as the Borrower becoming insolvent. Upon default, it is the duty of the Lender to send written notification to the Borrower that a default has occurred and, thereafter, the burden shifts to the Borrower to cure the default within 15 days. If the Borrower fails to cure the default within 15 after receipt of notice from Lender, then the entire outstanding Loan Amount (principal and accured interest) "accelerates" meaning that it becomes due and owing immediately.
  
• Amortization Schedule. For all loan agreements where the user asks our system to calculate the amount of the loan payment or the users states a fixed loan payment amount (these are choices 2 through 6 in response to question 6 of the questionnaire), our system will create an amortization schedule that: (1) lists each payment called for under the agreement, (2) states the interest component of each payment, (3) states the principal component of each payment, and (4) states the prinical balance remaining after each payment. This is especially important information for tax purposes if your loan is of an investement or business nature. The system works with either yearly or monthly payments and payment periods of 6 months, 9 months, 1 year, 2 years, 3 years, 4 years, 5 years, 6 years, 7 years, 10 years, 12 years, 15 years, 20 years, 25 years, and 30 years.

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