Tip Sheet #7
Understanding the important features of
a commercial loan agreement when
registering a company in the U.S.
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.
Social Enterprise Associates (SEA) and the International Transactions
Clinic (ITC) at the University of Michigan Law School collaborated to
produce four annotated commentaries (Social Enterprise Associates
Tip Sheets #5-8) to assist entrepreneurs interested in creating and
operating ventures in the United States by providing clear and easy-to-
understand language that deciphers common business legal documents.
These four documents are:
Tip Sheet #5 – Articles of Incorporation
Tip Sheet #6 – Articles of Organization (LLC)
Tip Sheet #7 – Commercial Loan Agreement
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
Social Enterprise Associates
Tip Sheet #7
Co-authored with the
International Transactions Clinic
University of Michigan Law School
Tip sheets #5-8 are a series
of 4 annotated commentaries
to assist entrepreneurs
interested in creating
and operating ventures
in the United States
by providing easy-to-
understand explanations for
common legal documents.