Why lending agreement matters to a first-time founder
This contract determines how much the business receives, what it must repay and what the lender can do if terms are breached. Small clauses on fees, security, financial covenants or early repayment can materially affect runway. Local law also shapes enforceability and mandatory borrower protections.
Examples of lending agreement
A startup borrows €100,000 for 36 months at a fixed annual rate. Its agreement sets monthly repayments, requires quarterly financial statements and bars additional secured borrowing without consent. Missing two payments triggers default, allowing the lender to demand the outstanding balance subject to applicable law.
Common misunderstanding
It is not the same as a term sheet or informal promise. A term sheet usually summarises proposed commercial terms and may be mostly non-binding. The signed lending agreement creates the detailed obligations, although separate security documents, guarantees or local legal requirements may also apply.
When to use it
Use one whenever a company lends or borrows money, including founder or group-company loans. Record the amount, currency, interest, repayment dates, fees, default events, governing law and any security. Get jurisdiction-specific advice for substantial or secured borrowing rather than copying a generic online form.