Business Loan Agreement

What this document is

Lending to a business is not quite the same as lending to a person — even when the business is your friend's noodle shop or your own company. A business loan agreement records who the real borrower is: the registered business, the owner personally, or both. Alongside the usual loan terms — amount, interest, and repayment schedule — it captures the details that matter when a company is involved, such as the business registration and who is authorized to sign.

That distinction carries real weight. If a company borrows and later closes, the lender's claim is usually against the company, not the owner's personal savings — unless the owner signed a personal guarantee. This template makes those choices explicit before the money moves. It suits small, direct loans: an owner funding their own company, a friend backing a small business, or an informal investor lending working capital and expecting repayment rather than shares.

When to use it

• You are lending money to a friend's or relative's registered business rather than to them personally.
• You own a company and are putting your own money in as a loan you expect the business to repay — a director or owner loan.
• An informal investor is lending your business working capital and wants repayment with interest, not shares.
• A small business is borrowing from another small business and both sides want the terms in writing.
• You want it on record whether the owner personally guarantees the company's debt.

When not to use it

• The money buys a share of the business or a cut of profits — that is an investment or partnership, which needs different documents and usually professional advice.
• You are borrowing from or refinancing with a bank — the bank will insist on its own facility documents.
• The loan is secured against property, vehicles, or other registered assets — registered security involves country-specific procedures.
• You lend to businesses regularly or as a livelihood — commercial lending is a licensed activity in many countries.

Information you will need

• The business's registered legal name, registration number, and address
• Full name, ID details, and role of the person signing for the business (owner, director, authorized signatory)
• The lender's full legal name and ID or registration details
• Loan amount in figures and words, the currency, and the purpose of the loan
• Interest rate and how it is calculated, or a statement that the loan is interest-free
• Repayment schedule: installment amounts, due dates, and the final repayment date
• Whether the owner or a director personally guarantees repayment
• The bank accounts the loan will be paid into and repaid from

Clauses included

How to sign it

Make sure the person signing for the business actually has authority to borrow on its behalf — usually the owner, a director, or someone formally authorized. If in doubt, ask for the business registration document and check the name against it. In several countries, small companies also apply a company stamp or seal next to the signature; follow whatever is customary locally.

Pay the loan into the business's bank account, not the owner's personal account, and reference the agreement in the transfer note. This keeps the story consistent: a business loan, received by the business, repaid by the business.

Each side keeps a signed copy, and the business should file its copy with its accounting records — the loan needs to appear in the company's books, and the bookkeeper or accountant will need the terms.

Common mistakes

• Naming the owner as borrower when the money is really for the company — or the company when the owner intends to repay personally. Decide who the borrower is, then write it that way.
• Skipping the personal guarantee for a young company with little money of its own, then discovering the company has nothing to repay with.
• Paying the loan into the owner's personal account, which blurs whether the business ever borrowed at all.
• Not stating the loan's purpose. A short purpose line helps everyone — including the accountant and any future partner — understand what the money was for.
• Forgetting that a company's other debts compete with yours. A signed agreement helps prove your claim, but it does not jump the queue if the business fails.
• Letting a loan to your own company live only in your head. Write it down like any other loan, or the line between company money and your money disappears.

Frequently asked questions