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Loan Agreement for Funds, Trusts, and Other Financial Vehicles

Funds, Trusts, and Other Financial Vehicles · NAICS 525 · Loan Agreement

This Loan Agreement is tailored for funds, trusts, and other financial vehicles that extend credit or borrow funds in the course of their investment operations. Unlike generic loan documents, this template addresses the unique regulatory and fiduciary considerations of pooled investment vehicles, including compliance with the Investment Company Act of 1940, prudent lending standards, and the need for clear collateral arrangements. Whether you are a fund providing a bridge loan to a portfolio company or a trust borrowing for liquidity, this agreement helps you document the terms professionally and reduce legal risks.

When you need this document

When a mutual fund or closed-end fund provides a temporary loan to a portfolio company.
When a business development company (BDC) makes a debt investment in a private company.
When a trust borrows funds to meet distribution requirements without liquidating assets.
When a pooled investment vehicle extends credit to its own officers or directors, subject to compliance.
When a fund enters into a subscription line of credit with a bank or other financial institution.
When an investment vehicle lends securities or cash to another entity for short-term cash management.

What the generated draft includes

Parties and recitals identifying the lender entity type and borrower
Loan terms: principal amount, interest rate, repayment schedule, maturity date
Representations and warranties regarding authority and compliance with investment restrictions
Covenants covering use of proceeds, financial reporting, and maintenance of net asset value
Events of default and remedies, including acceleration and setoff rights
Collateral and security provisions, if applicable
General provisions: governing law, notices, amendments, severability

Frequently asked questions

What makes this loan agreement different from a generic one?

This agreement is drafted with language that addresses the lender's status as a fund or trust, including compliance with the Investment Company Act of 1940, fiduciary duties, and the need for board approval. It also includes events of default relevant to investment vehicles.

Can I use this agreement for a loan between a fund and its portfolio company?

Yes, it is suitable for that purpose. However, you should ensure that the loan is permitted under the fund's governing documents and that all necessary approvals are documented. The template includes representations to that effect.

Does this agreement include security interest provisions?

It includes a collateral description field and references to a security agreement or UCC filing. For a fully secured loan, you may need to attach a separate security agreement and financing statement.

Self-help document generator: you get a structured draft based on the facts you provide. It is not legal, tax, or financial advice; verify jurisdiction-specific rules before sending.