All our loan agreements are drawn outside the Consumer Credit Act 1974. Whilst that makes them unsuitable for companies in the business of lending or providing credit, for private lending they are very flexible, allowing you to make, more or less, the deal you choose.
These agreements can be used:
For short- or long-term lending
Regardless of where the two parties are: UK or abroad
For loaning amounts of any size, and with repayment terms of any complexity
The terms in these documents
Each document is drawn for circumstances that differ slightly from the others, so the terms in each vary. But be assured - all the documents include the terms appropriate for their purpose.
Note that we provide very extensive guidance notes with every document that explain each paragraph in the document in detail.
Almost all the templates provide for guarantors – even if the loan is secured against other assets as well.
In most cases, a guarantee is much more effective than other types of security because non-repayment risks a relationship and the reputation of the guarantor as well as of the borrower.
Additionally, in most situations, the lender only needs to satisfy himself that the guarantor has sufficient assets overall, and therefore doesn’t have to perform detailed valuations of individual items offered as security.
We strongly advise that you insist on a guarantor when you lend to a company. The guarantor should be one or more directors of the company. Remember that a guarantee is far more effective if it includes the spouse or life partner of a director.
The time period during which the sum is lent can be any you choose. There are no “legal” consequences in the loan term being long or short: no notices, no special registrations.
There is no limit in law on the interest that the lender charges. A lender can charge what rate he chooses. The rate can be variable from one time period to another. It can be reduced for prompt payment.
We have provided for a greater rate of interest if the debtor falls behind with repayments.
The lender is given strong protection
All templates provide strong protection for the lender. This applies more to those documents where the reason for lending is a business one rather than to help family or friends. We take the simple view that since the money is not a gift, the lender expects to get it back.
If you are lending to a family member it is unlikely that you will want to bankrupt him for a failed repayment. However, in a business deal remember that if the business goes down, a dispute as to entitlement is more likely to be against a liquidator or receiver than against the shareholder-director who took on the debt. That is why we make the term of these agreements so strong.
Assets as security
Physical goods can provide sound security because the lender should be able to acquire them and sell them easily should the borrower default. Of course, goods that can be removed easily provide better security than those that require specialist equipment to move them.
In these agreements, the sum lent can be secured either by the lender taking physical possession of the assets at the outset, or by leaving them where they are and describing them in sufficient detail in the agreement so that there can be no dispute as to what is charged. The agreement then provides the evidence that the item is secured.
Security is explained fully in the guidance notes to each agreement.
A loan to a company requires registration of the charge
If the borrower is a company then registration of the charge at Companies House will be required.
Bankruptcy and liquidation law is very complicated. There are rules as to the ranking priority order of different creditors. A loan which where the document is registered at Companies House takes priority over debts which are not registered. Strangely, it is the company that has the legal obligation to register every charge or debt, even though registration protects the creditor.
When the debt is repaid, whether fully or in part, the company has no obligation to inform Company House. However, it is in the company's own interests that potential investors and lenders are aware that it has satisfied all or part of the debt.
Although we provide explicitly that the company shall register the charge, it is best if the lender makes sure this is done. The debt will then be valid against a liquidator or administrator, should the company become insolvent.