Thinking About A Loan For You Business? You Might Need A Loan Agreement (2025 Updated)

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What Is A Loan Agreement?

In 2025, securing the right financing remains a key driver for business growth. Whether you’re launching a startup or expanding your existing organisation, a Loan Agreement is a crucial legal document. It clearly outlines the terms and conditions between a lender (the party providing the funds) and a borrower (the party receiving the funds), ensuring that everyone’s rights and obligations are well defined. For a deeper look into how contracts work, have a read of our guide on What Makes a Contract Legally Binding.

Private Loans

If you’re borrowing money directly from an individual – such as family or friends – you’re taking out a private loan. Even in these friendly arrangements, it’s essential to have a written Loan Agreement to safeguard your relationship and avoid future misunderstandings.

Private loans can either be secured or unsecured.

Secured loan: If the borrower defaults on repayment, the lender may claim a valuable asset, such as a house, as security. Often, a separate security agreement is also required, with the secured asset registered on the Personal Property Securities Register (PPSR) – a system that remains indispensable in 2025 for protecting lender interests.

Unsecured loan: No collateral is provided. Consequently, if the borrower fails to repay, the lender has limited means of recovering the funds, which can result in higher interest rates to compensate for the increased risk.

Bank Loans

When you secure a loan from a bank, they typically provide their standard legal documentation. However, this doesn’t mean you should sign without careful review. In 2025 the financial landscape is increasingly digital, so it’s important to have a lawyer assess the loan documents to ensure they meet current regulatory requirements and protect your interests. For further clarity on contractual basics, our article on What Makes a Contract Legally Binding is a great resource.

Loan Agreement Example

Andy is launching a mobile dry-cleaning business in 2025 and requires an extra $5,000 to purchase a van. Andy’s brother, Tommy, offers to lend him the funds to be repaid over five months. Initially, Andy assumed repayments would be made monthly, while Tommy favoured fortnightly installments. After discussing the terms, they agreed that repayments would be made fortnightly after the first month. They then had a lawyer draft a Loan Agreement to clearly document their arrangement and avoid any future disputes.

What’s In A Loan Agreement?

A comprehensive Loan Agreement in 2025 typically covers several key aspects to ensure a fair and legally sound transaction:

Loan Amount – The total sum of money being loaned.
Loan Term – The period within which the loan must be repaid, including any provisions for early repayment or extensions.
Interest Rate – Whether the rate is fixed or variable, and the applicable percentage or formula used.
Repayments – The frequency of repayments (e.g. fortnightly, monthly) and the final repayment date.
Defaults on Payment – The consequences if repayments are missed, including any penalty provisions or enforcement procedures.
Additional Fees – Details of any extra charges such as administrative fees or late payment penalties.

Need Help With A Loan Agreement?

Taking out a loan can provide the financial boost your business needs, but drafting or reviewing a Loan Agreement without professional legal advice may expose you to unnecessary risks. With regulations and market conditions constantly evolving, it’s essential that your agreement reflects the standards required in 2025. A proper review—such as through a comprehensive contract review—can save you from future disputes and costly misunderstandings.

At Sprintlaw, our team of experienced lawyers is here to help you draft or review your Loan Agreement, ensuring it complies with the latest legal requirements. We also offer guidance on other business legal matters, including advice on operating as a sole trader and optimizing your overall business contracts. Get in touch with one of our consultants for a no-obligation chat about safeguarding your business’s future in 2025.

Minna Boyle

Minna is the Head of People & Culture at Sprintlaw. After completing a law degree and working in a top-tier firm, Minna moved to NewLaw and now manages the people operations across Sprintlaw.