Commercial Loan Agreement
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14Tip Sheet #7
Commercial Loan
Agreement
Social Enterprise Associates
Understanding the important features of
Tip Sheet #7
a commercial loan agreement when
Co-authored with the
registering a company in the U.S.
International Transactions Clinic
University of Michigan Law School
Introduction
Taking an idea from conceptualization to inception and finally to
market is filled with many challenges. Legal documents in particular
are hard for entrepreneurs to understand, so many gloss over them.
However, they carry immense importance, as bad or wrong documents
can cost a lot of money.
Tip sheets #5-8 are a series
Social Enterprise Associates (SEA) and the International Transactions
of 4 annotated commentaries
Clinic (ITC) at the University of Michigan Law School collaborated to
produce four annotated commentaries (Social Enterprise Associates
to assist entrepreneurs
Tip Sheets #5-8) to assist entrepreneurs interested in creating and
interested in creating
operating ventures in the United States by providing clear and easy-to-
and operating ventures
understand language that deciphers common business legal documents.
in the United States
These four documents are:
Tip Sheet #5 – Articles of Incorporation
by providing easy-to-
Tip Sheet #6 – Articles of Organization (LLC)
understand explanations for
Tip Sheet #7 – Commercial Loan Agreement
common legal documents.
Tip Sheet #8 – Biggest Concerns for Foreign Investment in the U.S.
Commercial Loan Agreement
As the name indicates, a commercial loan agreement is the basic
document used by an entrepreneur to receive debt financing from a
bank. The specifics of the document will vary depending on the type of
lending institution, the location of the lending institution, the type of
loan, and the nature of the entrepreneur’s business. However, a number
of important features will remain constant for all commercial loans.
Representations, Negative Covenants, Affirmative Covenants,
Conditions Precedent, and Defaults and Remedies are found in nearly
every loan agreement. The following is a sample or template Loan
Agreement that includes all the aforementioned categories and is
annotated with brief, layman explanations of the important features of
the Agreement.
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Parent category: Business