A cash loan agreement is a document in which a lender (a financial institution) sets out the terms and conditions under which it is prepared to make a loan available to a borrower. This loan agreement stipulates the terms and conditions of the loan, which if agreed upon by both parties and is signed, amounts to a contract agreement.

The loan agreement is divided into key sections such as:

A definitions section, which defines some of the terms which will be used in the document.

The mechanical section which sets out how the agreement will operate. This section will stipulate the amount being borrowed, the repayment schedule and the interest terms.

The transaction-specific section deals with the parties’ responsibilities to each other. It details what happens if the borrower defaults on the loan.

The Standard clause section outlines the law(s) which governs the agreement.

The cash loan agreement is a contract between a borrower and a lender which regulates the mutual promises made by each party, so there are various representations taken into consideration before a loan agreement is signed.

These may include an applicant’s character, creditworthiness, cash flow and collateral.

The cash loan agreement is usually in written form.