Division 7(a) Loan Agreement Template

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A Division 7A loan agreement template is a crucial legal document that outlines the terms and conditions of a loan provided by the Small Business Administration (SBA) under the 7(a) Loan Program. This program offers financial assistance to small businesses in the United States. A well-crafted template ensures clarity, legal compliance, and protects the interests of both the lender and the borrower.

Key Elements of a Division 7A Loan Agreement Template

A comprehensive Division 7A loan agreement template should include the following essential elements:

Division A Loan Agreement
Division A Loan Agreement

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1. Parties Involved

Borrower: Clearly identify the borrower, including their legal name, address, and any relevant business information.

  • Lender: Specify the lender, which is typically an SBA-approved lender, such as a bank or credit union.

    • 2. Loan Amount and Terms

    Division A Loan Agreement
    Division A Loan Agreement

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    Principal Amount: State the total amount of the loan being provided.

  • Interest Rate: Clearly outline the interest rate applicable to the loan, including any fixed or variable rates.
  • Repayment Schedule: Specify the repayment terms, including the frequency of payments (e.g., monthly, quarterly) and the duration of the loan.
  • Maturity Date: Indicate the final date on which the loan must be fully repaid.

    • 3. Collateral

    Collateralized or Unsecured: Clearly state whether the loan is secured by collateral or unsecured.

  • Collateral Description: If the loan is secured, provide a detailed description of the collateral, including its value and location.

    • 4. Default

    Events of Default: Define specific events that would constitute a default, such as failure to make timely payments, breach of covenants, or bankruptcy.

  • Remedies: Outline the remedies available to the lender in the event of a default, such as acceleration of the loan, foreclosure, or legal action.

    • 5. Covenants

    Affirmative Covenants: Specify actions that the borrower must take, such as maintaining certain financial ratios, providing financial statements, and obtaining insurance.

  • Negative Covenants: Outline actions that the borrower must refrain from doing, such as incurring additional debt or selling assets without consent.

    • 6. Prepayment

  • Prepayment Rights: Detail the borrower’s right to prepay the loan, if any, and any associated prepayment penalties.

    • 7. Governing Law

  • Governing Jurisdiction: Specify the state or federal law that governs the agreement.

    • 8. Notices

  • Notice Provisions: Outline the procedures for delivering notices and communications between the parties.

    • 9. Representations and Warranties

  • Borrower’s Representations: Include statements made by the borrower about their financial condition, business operations, and compliance with laws.

    • 10. Entire Agreement

  • Integration Clause: State that the agreement constitutes the entire understanding between the parties and supersedes any prior agreements or representations.

    • Design Elements for a Professional Template

    To create a professional and trustworthy Division 7A loan agreement template, consider the following design elements:

    1. Clear and Concise Language

    Use plain language and avoid legal jargon.

  • Define technical terms.
  • Use short sentences and paragraphs.

    • 2. Consistent Formatting

    Use a consistent font, font size, and line spacing throughout the document.

  • Use headings and subheadings to organize the content.
  • Use bold or italics to emphasize important terms.

    • 3. Professional Layout

    Use a clean and professional layout.

  • Use ample white space to improve readability.
  • Use a clear and easy-to-read font.

    • 4. Legal Disclaimer

    Include a disclaimer stating that the template is for informational purposes only and does not constitute legal advice.

  • Encourage borrowers to consult with an attorney to review the agreement and address specific legal concerns.

    • By incorporating these elements, you can create a Division 7A loan agreement template that is both professional and easy to understand. Remember to consult with an attorney to ensure that your template complies with all applicable laws and regulations.