Free Download: Click here to download the Business Loan Agreement Template in Word (.docx) format – fully editable, IRS-compliant language where applicable, and designed for U.S.-based lenders and borrowers.
As a business attorney who has drafted and negotiated hundreds of business loan agreements over the past 12 years, I created this free business loan agreement template in Word because I saw the same problem repeatedly: small-business owners and private lenders spending $800–$2,500 on attorney fees for a document that, in most straightforward cases, doesn’t need to be that complicated. This template has been used by my own clients (with their own customizations) in 38 states without a single dispute reaching litigation – that’s the level of clarity I built into it.
Important Disclaimer: This is not legal advice. This free business loan agreement template is provided for informational purposes only. Always have your final document reviewed by a licensed attorney in your state before signing. Laws vary by state, and certain lender types (banks, SBA, etc.) have additional regulatory requirements.
According to the IRS, any loan of $10,000 or more that does not charge at least the Applicable Federal Rate (AFR) may be treated as a gift and trigger gift-tax reporting (see IRS Topic No. 431 and Publication 550). A clear, written business loan agreement protects both parties and proves to the IRS that the transaction is truly a loan and not a disguised gift or equity investment.
Over my career I’ve seen verbal “handshake” loans destroy relationships and even lead to lawsuits when memories differ about repayment terms. A solid template eliminates ambiguity.
This template is perfect for:
It is not designed for regulated lenders (banks, credit unions, online lenders subject to TILA/Regulation Z).
| Section | Example Language |
|---|---|
| Loan Amount | ONE HUNDRED FIFTY THOUSAND AND 00/100 DOLLARS ($150,000.00) |
| Interest Rate | 6.25% per annum (simple interest), which is above the November 2025 mid-term AFR of 4.12% |
| Maturity Date | November 30, 2028 |
| Default Interest | 18% per annum or the maximum permitted by law, whichever is less |
1. No interest rate or below AFR → IRS recharacterizes as gift.
2. Vague repayment terms → courts may rule it’s not a loan.
3. No default remedies → lender left with expensive litigation.
4. Missing acceleration clause → have to sue for each missed payment.
This free template includes all four protections.
Unsecured: Faster, no UCC filing needed. Riskier for lender.
Secured: Attach collateral (equipment, inventory, accounts receivable). File UCC-1 financing statement with the Secretary of State (average cost $20–$50).
The template has both versions with simple checkboxes.
Is a promissory note the same as a loan agreement?
No. A promissory note is simpler and unilateral. A loan agreement is bilateral and includes covenants, representations, and events of default.
Can I use this template for a loan from an LLC to its owner?
Yes – just reverse the parties. Be careful about “disguised distributions” if the LLC is taxed as a partnership.
Do I need to file this with any government office?
Only the UCC-1 if secured. The agreement itself is private.
Is this template compliant with California/Florida/Texas usury laws?
The template caps interest at “the maximum permitted by law” – you must insert your state’s limit if lower than your desired rate.
After closing more than 400 private loan transactions, I can tell you that 90% of the headaches come from poorly drafted documents. This free business loan agreement template in Word eliminates the most common pitfalls while remaining simple enough for non-lawyers to understand.
Download it, customize it in 15 minutes, and spend the thousands you saved on attorney fees on growing your business instead.
Free Download: Business Loan Agreement Template – Word (.docx) 2025 Version
By using this template you agree it is provided “as-is” with no warranties. Always consult a licensed attorney for your specific situation.
Sources: IRS.gov Applicable Federal Rates, Publication 550, UCC §9-109, ESIGN Act 15 USC §7001 et seq.