Essentials of the Loan Agreement in Florida

The loan agreement in Florida is a legally binding agreement that binds two parties into a contract as a way of ensuring that that the loaned amount/ balance will be reimbursed back to the lender within the agreed duration. In this agreement, also called the loan contract or the money lending contract in Florida, the borrower, and the lender agree on specifics about the loan, for example, the late fees, grace period (if any), final due date for the balance, full balance to be paid, payment type agreed, etc. The agreement also addresses the security that will be attached to the loan.

To create airtight agreements on loans and the repayment terms, we’ll help you get started on the right foot. Below, we look at the essential elements of the business loan agreement and what the statutes direct with regards to the loans. It’s also worth noting that you can create loan agreements with ease, thanks to our free Florida loan agreement template which outlines the important sections of the agreement. Our free loan agreement template represents the simplified version of the official agreement documents, which means that once you agree on the terms and sign it, it becomes enforceable.

Important Clauses in Your Florida Loan Agreement

The loan agreement is only enforceable if has the following sections covered and the applicable terms specified:

Parties to the agreement

The loan contract is only enforceable if it specifies the names of the parties to the contract. The lender and the borrower must be specified in the agreement.

The Loan

This section specifies that the lender agrees to extend to the borrower a loan whose principal doesn’t exceed $5,000,000 (or any other agreed amount), for the specified purpose. The borrower, on the other hand, agrees to take up the loan and use the proceeds thereof for the purposes provided for herein the contract. A promissory note will be used to evidence the loan, with the borrower agreeing to pay the agreed principal and interest.

Loan’s Security

• As one of the terms of the loan, the agreement provides for the security for the loan. The state accepts the following as security:

• • Mortgage

  • UCC-1 Financial Statement to be filed with the Clerk of the Circuit Court in the respective county that the land is located within the state

  • Assignment of the Rents and Leases from the date agreed by the lender and the borrower; encumbering all the property rights specified therein

  • The Guaranty

  • Any other collateral required by the statutes under the loan documents or any other collateral provided by the borrower and acceptable by the Lender as their preferred Security Documents.

Loan Fee

The lender charges a loan fee, also called the Loan Origination Fee. As a condition for giving the loan, the borrower must pay a non-refundable loan fee. The value of this fee is variable depending on the lender and the value of the loan. The loan agreement must specify that the parties to the contract recognize and also agree that the Loan Fee represents purchasing the rights to secure the loan on the borrower’s part and not a charge for the use of the money. Also, the loan fee is not a form of material inducement by the lender to process the loan, and this fee will be payable by the borrower along with the other payments to the lender. Think of this as one of the T&Cs for the loan, as specified in the Loan Documents.

Contract Length and Loan’s Amortization: This is the length of the loan contract, which is ascertained based on the lender’s amortization schedule. The lender used the amortization table to determine the interest rate applicable to the amount of money needed by the borrower. Conditions for early loan repayment (if any) will also be covered.

Loan/ Usury Rates

• The state places the upper limit for loan interest rates at 18% per annum (simple interest) for loan amounts not exceeding $500,000 and 25% per annum for loan amounts over $500,000. This interest rate requirement is not, however applicable to:

• • Federal Housing Administration’s commitment to insure

  • Guarantee commitment by the US Department of Veterans Affairs

  • Commitment to purchase the loan by the Government National Mortgage Association, Federal National Mortgage Association, the Federal Home Mortgage Corporation, or any other agency, department, or the Federal Government’s instrumentality.

  • These terms for usury rates apply to the loans made after the effective date of these 2017 Florida Statutes (Statutes Title XXXIX Ch. 687.03 and Ch. 687.071).

  • Besides stating the applicable interest rate, the statutes also require that loan agreements specify whether the interest rate applied is fixed or variable.

Prepayment fees/ Penalties

The contract must specify the steps and the fees charged in the event of defaulted payment, and whether a pre-payment fee is applicable or not. Note that if you are taking an auto loan, you will be charged a prepayment fee for making full payments before the loan’s maturity date.

Warranties and Representations

• This clause specifies the conditions to be met by the borrower for the loan application to be approved:

• • The borrower must be well-organized, in good standing, and with the power/ authority to own property and run business within the jurisdiction.

  • The borrower must have the authority and power to consummate transactions being contemplated in the agreement

  • Provide all necessary documentation (different for individual lenders and organizations)

  • Provide valid loan documents

  • The borrower should also furnish the lender with all required financial statements

Payments

The contract also specifies the payment plan agreed by the lender and the borrower. The method of payment is specified here, as is the payment frequency, payment due date, and the late fees.

• The other important sections include:

• • Waivers and Non-waivers

  • Conflicting terms

  • Notice

  • Governing law

  • Co-signer (if present).

Signatures

This is the last section of the loan agreement. For the enforcement of the personal or the business loan agreement, this section must be signed by the lender and the borrower(s) or co-signer, in the presence of a witness. All signatures must be dated.

To get started with your loan agreement in Orlando, Miami, Jacksonville, Tampa, Naples, or any other city in Florida, download our free loan agreement form here.