Business credit agreement - NO interest

                                                                              GUIDANCE NOTES

                                                             FIXED LOAN BUSINESS AGREEMENT

What the terms and conditions contain

  The following agreement provides the structure for a fixed sum loan – with interest -  between two parties that are both businesses.

  It is used when the seller is allowing a buyer to pay over a period of time – so the seller is giving credit when someone is buying the seller’s products and/or services. For example, the seller is offering an expensive product for sale and the buyer can either pay for it in one lump sum or over six monthly instalments.

  This agreement also means that you are asking the buyer to pay extra (interest or charges).

  This type of credit agreement is NOT usually regulated by consumer credit legislation provided that the customer is

• A limited company or
• A limited liability partnership
• Partnerships of more than 3 people (since the Consumer Credit Act of 2006, partnerships of 3 or fewer (unless the partners are all themselves limited companies in their own right) are considered to be “individuals” and are likely to fall within consumer credit regulations  so you need to comply with consumer credit law)

  This agreement contains terms and conditions under which you the seller (or creditor) will loan the money (or credit) and the buyer (debtor) will borrow it.  It also deals with standard business eventualities such as repayment and default. 

How to use the terms and conditions and why you should use them

  Before you enter into an agreement to loan or borrow money, whether you are the debtor or the creditor, the terms and conditions of that loan must be agreed by both parties.  This will provide a basis for the loan of the money, for repayment and for resolving any future disputes. Once this agreement is signed it then becomes effective as the set of guidelines that will govern the relationship between debtor and creditor until the money has been paid back.

  Having everything clearly set out in writing – and signed – prevents any selective memory loss or issues with forgotten agreements, amounts or dates.  It’s good business sense.

Do you need a credit licence?

  It is possible when you offer credit that you may need to apply for a credit licence, issued by the Office of Fair Trading.

  However, if your customers pay their bills in four or less instalments over a year then you may not need one. Trading without a licence when you need one is a criminal offence and so you should take specific advice about this.

Standard content

  This agreement contains standard ‘boilerplate’ clauses that would usually be found in a fixed loan business agreement.  These cover the mechanics of the loan and are listed below:

• Details of the monies to be loaned
• How the loan will be repaid and the interest that is to be charged
• What constitutes a repayment default
• What constitutes another type of default, such as bankruptcy or appointment -of a receiver with respect to either party
• Non-assignment clause
• Instructions for service of notices
• Invalidity of individual clauses does not affect the agreement as a whole

This document is specifically for a fixed loan business agreement

  This document will not provide an effective structure for anything other than a fixed loan business agreement.

  This is an agreement for use between a business seller and a business buyer. Do NOT use this agreement if you are a business that is extending credit to its own customers who are not businesses. If you are allowing a customer who is not a business to buy in this way you need an agreement regulated in accordance with consumer credit legislation.

  If you are looking for terms and conditions for the supply of services, or for any other document, please see our contents pages.

File Type: Word File