A loan agreement is a contract in which one company (the lender) provides a loan to another company (the borrower), and the borrower is obligated to repay the loan along with any accumulated interest to the lender by the specified deadline stated in the agreement.

When can this loan agreement template be used?

This loan agreement template is suitable when both the lender and the borrower are companies. The same format can also be used for loans between individuals. However, if you want to create a loan agreement where the lender is a company and the borrower is an individual, the requirements set by the Consumer Credit Act under the Law of Obligations Act must be followed. You can find a template for such a loan agreement here.

What restrictions apply to loans between companies?

According to the Commercial Code, a company is not allowed to lend money to certain individuals, including:

• Shareholders or partners of the company who hold more than 5% of the shares in a limited liability company or more than 1% of shares in a public limited company;
• For a loan granted by a limited liability company, its parent company's shareholders, partners, or members who hold more than 5% of the parent company;
• For a loan granted by a public limited company, its parent company's shareholders, partners, or members who hold more than 1% of the parent company;
• Individuals who intend to use the loan for acquiring a shareholding or shares of the company;
• Members of the management board, supervisory board, or authorized representatives.

An exception is made for intra-group lending, where a subsidiary may grant a loan to the parent company or its shareholder/partner, but only if the loan does not negatively affect the subsidiary’s financial position or the interests of creditors.

What can be used as loan collateral?

Common collateral types include real estate (such as property or building rights), guarantees, and sureties. Commercial pledges (pledge over the entire movable property of the company), securities pledges (such as shares of a limited company or a public limited company), cars, and other assets agreed upon by the parties can also be used. Some pledge agreements must be notarized (mortgage, commercial pledge), while others can be done with a simple written contract (guarantee, surety). For more specific information regarding different types of pledges, our lawyers can assist you.