Loan Agreement Template For Friends And Family Loans

Mia runs a small cafe in Wellington and needs $30,000 for a new coffee machine and a fit-out refresh. Her uncle is happy to lend the money interest-free, and they both trust each other. The awkward part is working out what happens if sales are slower than expected, or if Mia wants to repay early.

That's where a written loan agreement helps. It keeps the relationship clear, gives your accountant something reliable to work from, and reduces the chance of a difficult conversation later.

If you're looking for a loan agreement template for NZ, the key isn't just having a document. It's making sure the right clauses match your business, the lender, the repayment plan and whether it is a secured or unsecured loan.

Do You Need A Written Loan Agreement For A Family Or Friend Loan?

Yes, you should use a written loan agreement whenever your business borrows money from a relative, friend, founder or shareholder. A handshake might feel easier, but it often creates uncertainty exactly when you need clarity.

A written loan agreement should make it clear that the money is a loan, not a gift or an investment. This matters because each option has a different commercial and accounting result:

• Loan: your business has to repay the money on agreed terms.
• Gift: there's usually no repayment obligation.
• Investment: the person may receive shares or another ownership interest instead of ordinary repayment.

For example, if your aunt transfers $20,000 into your company account and the bank reference only says cafe help, your accountant may need to ask whether it's a director loan, shareholder loan, income, a gift or a capital contribution. That can create messy records.

A written agreement also helps if circumstances change. Maybe the lender needs the money back sooner than expected. Maybe your cash flow dips. Maybe another shareholder asks whether the shareholder loan was approved properly. The agreement gives everyone a starting point.

For business loans, you should also consider whether the lender is regularly lending money or whether the loan is really for personal, domestic or household purposes. The Credit Contracts and Consumer Finance Act 2003 can apply to certain consumer credit arrangements. Many one-off private business loans will sit outside that consumer credit framework, but the details matter.

What Should A New Zealand Loan Agreement Template Include?

A good New Zealand loan agreement template should include the parties, loan amount, purpose, repayment dates, interest, default rules, security and signing details. It should also be tailored before you use it, because small wording changes can make a big difference.

Here is a practical fill-in outline you can use to plan the document. This isn't a finished legal document, but it shows the clauses you should think through before money changes hands.

1. Parties: write the legal names of the lender and borrower, including the company name and NZBN if your company is borrowing.
2. Loan Amount: state the exact amount being lent and the date funds will be advanced.
3. Purpose: describe what your business will use the money for, such as equipment, stock or working capital.
4. Term: state when the loan starts and when it must be fully repaid.
5. Repayments: set out the payment amounts, dates and bank account details.
6. Interest: say whether interest is charged, the rate, how it's calculated and when it's paid.
7. Default Interest: state whether a higher rate applies to overdue amounts.
8. Early Repayment: say whether your business can repay early and whether any fee applies.
9. Default Events: list what counts as a serious breach, such as missed payments or insolvency.
10. Security: describe any assets the lender can take security over and whether a PPSR registration is needed.
11. Guarantees: name any guarantors and explain what they're personally promising.
12. Records And Notices: explain where formal notices go and what records the parties should keep.
13. Governing Law: state that New Zealand law applies.
14. Signing: include correct signing blocks for individuals, companies and any guarantors.

Free templates can be a helpful starting point, but they often miss the parts that cause real issues, such as security, guarantees, tax records and what happens if your business misses a repayment.

Can A Business Loan Be Interest Free?

Yes, a business loan can be interest-free, as long as the agreement says so clearly and everyone understands the accounting and tax treatment. Interest-free loans are common between family members, founders and shareholders, but they should still be documented properly.

If the loan is interest-free, the agreement should say:

• the interest rate is 0%;
• whether interest can ever start applying, such as after a default;
• whether the lender can change the interest rate later;
• whether early repayment is allowed; and
• whether any fees, charges or reimbursements are payable.

Don't leave the interest clause blank. A blank clause can create arguments about whether interest was forgotten, implied or meant to be agreed later.

You should also speak with your accountant about IRD treatment. If interest is charged, the lender may have taxable interest income and your business may need to think about deductions and resident withholding tax. If no interest is charged, there can still be accounting questions, especially where the lender is a shareholder, director or associated person.

Say Mia borrows $30,000 from her uncle on 1 July 2026. They agree there's no interest if she repays $2,000 per month for 15 months. The agreement says that if Mia misses two monthly payments, the unpaid balance becomes due and default interest of 8% per year applies only to overdue amounts. That gives Mia breathing room, but it also gives her uncle a clear remedy if the loan goes off track.

How Do Repayments, Default And Early Repayment Work?

Repayments, default and early repayment work best when the agreement spells them out in numbers, dates and consequences. This is where many private loan agreements are too vague.

Repayment Dates

Be specific. Instead of saying repay when the business can afford it, say something like 24 monthly payments of $1,250, due on the 15th day of each month, starting 15 August 2026.

You can choose a structure that suits your cash flow, such as:

• Fixed monthly repayments: useful when revenue is reasonably steady.
• Quarterly repayments: useful where your business has seasonal cash flow.
• Interest-only period: useful when you need time before principal repayments start.
• Balloon payment: smaller instalments during the term, with a larger final payment.

Default Events

A default clause should say what counts as a serious problem. Common examples include:

• your business misses a repayment and doesn't fix it within a set grace period;
• your business becomes insolvent or is placed into liquidation;
• you gave materially incorrect information before the loan was made;
• you sell or dispose of secured assets without consent; or
• a guarantor withdraws support or becomes insolvent.

The agreement should then say what the lender can do. For example, the lender may be able to require immediate repayment, charge default interest, or enforce a registered security interest. If something has already gone wrong, consider a loan agreement review and keep written records of payment dates, conversations and updated repayment promises before you agree to any variation.

Early Repayment

If your business may repay early, say so. Some lenders are happy with early repayment at any time. Others may want notice, especially if they're relying on interest income. A simple clause can avoid a surprise later.

Should You Ask For Security Or A Guarantee?

It depends on the size of the loan, the lender's risk and what assets your business has. Security and guarantees give the lender extra protection, but they also create bigger consequences for you if the loan isn't repaid.

Security means the lender takes an interest in an asset. For a business loan, security is often taken over:

• business equipment, such as machinery, tools or vehicles;
• stock or inventory;
• accounts receivable;
• intellectual property; or
• all present and after-acquired personal property of the company.

In New Zealand, many security interests in personal property should be registered on the Personal Property Securities Register, often called the PPSR. The PPSR is the register used under the Personal Property Securities Act 1999. Registration can affect priority if your business becomes insolvent or if more than one lender claims an interest in the same assets.

If your relative is lending $5,000 for short-term stock, they may decide security isn't worth the complexity. If they're lending $80,000 for equipment, a properly drafted security clause and PPSR registration may be much more important.

A guarantee is different. It means another person promises to repay the loan if the borrower does not. If your company borrows the money, the lender may ask you, as a director or shareholder, to give a personal guarantee. That means your personal assets could be exposed if the company can't repay.

Don't treat guarantees as a formality. If a guarantee is involved, each guarantor should understand exactly what they're promising before signing.

What Is Different About A Shareholder Loan Agreement?

A shareholder loan agreement is different because the lender may also own part of the company, sit on the board or be involved in major business decisions. That overlap can create confusion unless the loan terms are kept separate from the shareholder relationship.

If your company borrows from a shareholder, the agreement should cover the usual loan clauses, plus a few extra points:

• whether the loan is subordinated to bank debt or other creditors;
• whether all shareholders were offered the same chance to lend;
• whether the loan can convert into shares later;
• whether shareholder approval is needed under your constitution, shareholders agreement or company shareholders agreement;
• whether the lender has any extra information rights; and
• what happens if the shareholder sells their shares while the loan is still outstanding.

You should also check your company records. Under the Companies Act 1993, directors need to act in the best interests of the company and keep proper company records. If the loan is approved by the board, keep board minutes or written resolutions. If your company has a constitution or shareholders agreement, check whether it sets rules for related-party funding, issuing shares, or taking on significant debt.

For example, Leo and Aroha each own 50% of a design studio. Aroha lends the company $40,000. If the agreement says the loan can convert into shares at Aroha's option, Leo's ownership could be diluted later. That may be fine if everyone agreed to it, but it shouldn't be buried in a vague email.

Shareholder loans are also an area where your accountant's input is useful, especially for current accounts, interest, withholding tax and year-end financial statements.

Key Takeaways

• A written loan agreement helps show that money from a friend, relative or shareholder is a loan, not a gift or investment.
• Your agreement should clearly cover repayment dates, interest, default, early repayment, security and guarantees.
• Interest-free loans are allowed, but the agreement should still say the rate is 0% and your accountant should check the tax treatment.
• If the lender takes security over business assets, you may need a PPSR registration to protect that security interest.
• Shareholder loans need extra care because they can affect company records, control, funding rights and future share issues.
• A template is only a starting point. The document should be tailored before you sign or accept funds.

If you'd like help with your loan agreement, shareholder loan terms, security clauses or company approvals, you can reach us at 0800 002 184 or team@sprintlaw.co.nz for a free, no-obligations chat.