What is a Commercial Loan Agreement?

Having it in writing gives startups, founders and early-stage investors a single reference point if expectations later diverge — which is precisely when memories of what was agreed stop matching.

The form collects 14 details across 4 areas: parties and contact details, payment and financial terms, dates, timing and duration, and legal protections and risk. The entries describing the investment do the most work, because every later clause about price, timing and completion refers back to them.

The recurring failure in this kind of arrangement is a conversion trigger that produces a number nobody expected. Business agreements tend to fail at the edges — deadlock between owners, automatic renewals nobody diarised, and liability caps that turn out to sit above the value of the contract.

The preview updates live as you complete each field, so you can review the exact language before downloading it as PDF or Word. Treat the result as a well-organised first draft: sound in structure, but worth an attorney's review where the sums involved are significant or the situation is unusual.

What matters most in a commercial loan agreement

Information and consent rights

Investors commonly get reporting rights and a veto over specified major decisions. Keep the veto list workable for the founders.

Interaction with future rounds

Consider how the instrument behaves at the next financing, on a sale, and if no round happens before maturity.

Conversion mechanics decide the economics

Valuation cap, discount and the trigger event determine what the investor ultimately receives. Model the dilution before agreeing.

When you need a commercial loan agreement

  • When replacing an earlier arrangement: Issue a fresh commercial loan agreement when the original terms no longer reflect what the parties actually do. Amending informally leaves two inconsistent records of one relationship.
  • When the information rights the investor keeps afterwards has value: Where something is still owed after each conversion or repayment date, that obligation needs its own words. Anything expected to survive the end of the agreement has to say so.
  • When either side may need an exit: Agree how the arrangement ends while both parties are still on good terms. Exit clauses negotiated during a dispute rarely favour anyone.
  • When more than one person is involved: Where several people share the obligation, the commercial loan agreement should say whether they are liable together, separately, or both. That single word decides who can be pursued for the whole amount.
  • When you already have the cap table before and after the round: If there is a brief, plan, specification or schedule, attach it. An agreement that refers to a record nobody has attached is only half a record.
  • When risk needs allocating: Decide who carries which risk and who insures it before an incident rather than after one. Afterwards, both readings of the silence are self-serving.

What to include in a commercial loan agreement

This generator collects 14 details. Here is what each group covers and why it matters when the document is relied on.

Parties and contact details

Everything else in the document hangs off these names: the investor carries the obligations, the company carries the payment, and both need identifying precisely enough to be found later.

Lender Name
The person or institution advancing the funds.
Lender Address
The lender's address for repayments and default notices.
Borrower Name
The person or entity responsible for repaying the loan in full.
Borrower Address
The borrower's address for statements and demand notices.

Payment and financial terms

Payment terms are relied on more often than any other clause and left vague more often than any other clause. State the amount, the trigger, the deadline and what follows a late payment.

Loan Amount
The principal sum advanced, written in both figures and words to prevent later argument.
Interest Rate
The annual rate and how interest accrues. Most states set a usury ceiling that caps enforceable interest.
Payment Terms
The invoicing cycle, payment window, accepted methods and consequences of non-payment.
Late Fee
The charge for overdue payment and the grace period before it applies. Keep the fee proportionate — a penalty that vastly exceeds actual loss is often unenforceable.

Dates, timing and duration

Where the investor depends on the company for something, say what happens to these dates when it arrives late. Otherwise the delay attaches to the wrong party.

Effective Date
The date the agreement takes effect. This can differ from the signature date, and it is the date obligations start running from.
Repayment Start Date
When the first instalment falls due, including any agreed payment holiday.
Maturity Date
The date the final payment is due and the balance must be cleared in full.

Legal protections and risk

Naming the governing law and the forum here avoids a preliminary fight about where a dispute over the investment is even heard.

Collateral
Any asset securing the obligation, described precisely enough to identify and recover it.
Default Terms
What counts as a default, any cure period, and the remedies available to the non-defaulting party.
Governing State
The state whose law governs the agreement. Choose a state connected to the parties or the work, as a wholly unconnected choice may not be respected.

Completing this commercial loan agreement

Making the counts checkable

Where the price depends on instalments, keep a contemporaneous record as they are delivered. A count reconstructed at invoice time invites a challenge that a running record would have prevented.

Keeping the version straight

Date the document and mark superseded drafts clearly. Two unlabelled versions in circulation is a surprisingly common cause of genuine, honest disagreement.

Reviewing it against what actually happens

Arrangements drift. If the way the investor and the company work together has moved away from the wording, reissue the document rather than relying on a version that no longer describes reality.

Reading it as the other side would

Before signing, read the commercial loan agreement from the counterparty's position and look for anything you would exploit. If you find something, so will they.

Attaching the cap table before and after the round

The cap table before and after the round carries most of the evidential weight here. Attach it as a schedule and refer to it by name in the body, rather than leaving it as an email nobody can find later.

Common mistakes to avoid

  1. Leaving the information rights the investor keeps afterwards to good faith. Good faith is not a plan. Write down what happens after each conversion or repayment date, because that is the point at which the parties' interests stop being aligned.
  2. Not planning for a conversion trigger that produces a number nobody expected. This is the failure that recurs in this kind of arrangement. Name it in the agreement and say who carries the cost when it happens, because working it out afterwards means negotiating from a weak position.
  3. Copying an agreement without changing the substance. The structure travels between deals. The description of the investment, the money and the dates do not — and those are precisely the clauses that get litigated.
  4. Verbal instructions on top of a written contract. Once instructions start being given by phone or in passing, the written agreement stops describing the arrangement. Confirm changes in writing the same day.
  5. Leaving confidentiality out. Both sides usually see something they should not repeat. A short confidentiality clause that expressly survives the end of the agreement covers it.

How to use this commercial loan agreement generator

  1. Fill in the form. Enter the 14 details requested. Where an entry depends on a count — instalments, dates, amounts — put the number in rather than a description of it. Nothing is sent to a server — the document is assembled in your browser.
  2. Read the preview. The preview updates as you type and is editable, so you can adjust the wording before downloading — useful where a conversion trigger that produces a number nobody expected needs a sentence of its own that the standard clauses do not cover.
  3. Download and sign. Take the PDF for signing or the Word version for further edits. Make sure the signed copy reaches everyone named, since a document held by only one side is hard to rely on.

Commercial Loan Agreement — frequently asked questions

What is the difference between a SAFE and a convertible note?

A convertible note is debt: it carries interest, has a maturity date, and must be repaid or converted by then. A SAFE is not debt — there is no interest and no maturity, and it converts only if a triggering event occurs, which means it may never convert at all. SAFEs are simpler and founder-friendly; notes give investors the leverage of a repayment date. Both dilute, and both warrant legal advice.

Can a commercial loan agreement be changed after signing?

Only by agreement, and the change should be recorded in writing and signed by both sides. Once amendments start being made by phone or in passing, the written document stops describing the arrangement, which defeats the purpose of having one.

When is a commercial loan agreement treated as complete?

At each conversion or repayment date — but only if the document says what has to be true for that point to have been reached and who confirms it. Without a test, the investor considers the obligation discharged while the company is still waiting, and neither reading is unreasonable on the wording.

Which state's law should govern this commercial loan agreement?

Choose a state with a genuine connection to the parties or the subject matter — where a party is based, or where the work or property is located. A choice with no connection at all may not be respected, and for property or employment the local state's rules will often apply regardless of what the contract says.

How much can the late fee be?

It should be a genuine estimate of the cost of late payment, not a punishment. Courts strike down fees that are disproportionate to actual loss, and several states cap late fees on rent specifically. A modest percentage after a stated grace period is the defensible approach.

Is there a limit on the interest I can charge?

Yes. Every state sets a usury ceiling, and the limits vary considerably. Charging above it can render the interest unenforceable and in some states carries further penalties. Check your state's current cap before agreeing a rate, particularly if you lend more than occasionally.

Should every business agreement be reviewed by a lawyer?

Not every one. Routine, low-value or short-term agreements are commonly handled in-house from a solid template. Anything involving significant money, equity, exclusivity, long-term commitment or unusual liability is worth a review.

Does a business contract need to be signed by a director?

It needs to be signed by someone with authority to bind the entity. For a company that is typically a director or an officer with delegated authority; for an LLC, a manager or authorised member. If you are unsure, ask for evidence of authority before relying on the signature.