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Intercompany Loan Agreement Example

Intercompany Loan Agreement Example

When companies need to raise funds for various reasons, one option is to borrow money from a related company. This is called an intercompany loan and requires a loan agreement to be drafted and signed by both parties. In this article, we will provide an example of an intercompany loan agreement.

Before delving into the loan agreement example, it`s essential to understand the basics of an intercompany loan. This type of loan occurs between two companies that have a common parent or direct relationship. The loan agreement outlines the terms of the loan, including the amount borrowed, the interest rate applied, and the repayment terms.

Now, let`s look at a sample intercompany loan agreement:

Loan Agreement

This intercompany loan agreement (the “Agreement”) is made and entered into effective as of 2024 by and between [Lender company name], a [state of incorporation] corporation with its principal place of business at [address], and [Borrower company name], a [state of incorporation] corporation with its principal place of business at [address] (collectively referred to as the “Parties”).

Loan Amount

The Lender agrees to lend the Borrower the principal sum of [loan amount] USD (the “Loan”) on the terms set forth in this Agreement.

Interest

The Loan shall bear interest at a fixed rate of [interest rate] percent per annum. Interest shall be calculated on the outstanding principal amount and shall accrue from the date of funding until the Loan is repaid in full.

Repayment

The Borrower shall repay the Loan in full on the maturity date of [maturity date]. The outstanding principal, together with any accrued interest, shall be due and payable on the maturity date.

Representations and Warranties

The Borrower represents and warrants that:

– It has the power and authority to enter into this Agreement.

– It is solvent and able to meet its obligations under this Agreement.

– The execution and delivery of this Agreement and the performance of the Borrower`s obligations do not and will not contravene any law or regulation or any other agreement to which it is a party.

Covenants

The Borrower covenants that:

– It will use the proceeds of the Loan solely for the purposes specified in this Agreement.

– It will maintain adequate collateral to secure the Loan as specified in this Agreement.

Default

If the Borrower fails to perform any of its obligations under this Agreement, including but not limited to the non-payment of amounts due under the Loan, the Lender may declare the Loan immediately due and payable in full.

Governing Law

This Agreement shall be governed by and construed in accordance with the laws of the state of [state of governing law] without giving effect to any choice of law or conflict of law provisions.

Conclusion

An intercompany loan agreement is an essential document that outlines the terms and conditions of a loan between two related companies. The above example serves as a template for drafting an intercompany loan agreement and is customizable based on the specific needs of the parties involved. As always, it`s crucial to consult with legal counsel before entering into any loan agreement.

Nutsbolts2023

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