This document is a simple repayment clause where there are multiple lenders and each lender has the same repayment rights under the loan agreement. It is designed to be inserted into a loan agreement. The defined terms in this clause have the same meaning as those in the precedent called “Basic loan agreement”.

Repayment to more than one lender

Sometimes a lender is not prepared to loan the full loan amount requested by a borrower but is prepared to loan part of the amount in conjunction with one or more other lenders who then loan the balance of the funds required by the borrower.

In this instance the loan agreement is more complex and it is incumbent on the drafter to customise the loan agreement taking into account the various rights of the lenders including:

• whether they will have joint and several rights to enforce the agreement;
• whether one lender will have a higher priority when it comes to enforcing the agreement and obtaining repayment of a loan under the agreement; and
• in the case of insolvency, whether one lender will have greater security protecting the debt than another lender.

One of the most important clauses in a multiple lender loan agreement is the provisions relating to how the borrower will repay each lender. For example:

• will each lender be entitled to the same amount of instalment payments from the borrower on a payment date or will one lender be entitled to a greater portion of the payment, or will one lender be entitled to payment of its full loan amount before other lenders are paid?
• will the borrower repay each instalment directly to each lender or will the borrower pay a lump sum centrally, such lump sum then to be divided among the lenders?

Related precedents

• Basic loan agreement
• Guarantee of payment of loan
• General security deed
• Amendment and restatement agreement
• Deed of priority
• Forbearance of debt agreement
• Deed of assignment of debt
• Real property mortgage
• Loan agreement checklist

This document has been authored for LexisNexis by Elise Margow, Principal, Legally Speaking.

This document is prepared with the assistance of Specialist Editors Geoff Geha, Partner, Clayton Utz and Karen Lee, Principal and Consultant, Legal Know-How.