Loan agreement drafting workflow
Loan agreement drafting is a discipline of alignment — the commitment letter, the term sheet, the loan agreement, and any security documents all need to say the same thing. Misalignment is where disputes start.
This is an 8-step workflow for drafting a bilateral commercial loan agreement governed by Australian law. It covers credit terms, security, conditions precedent, representations, and events of default.
Before you start
- Signed term sheet or credit paper approved
- KYC / AML checks complete on the borrower and guarantors
- Security structure agreed (unsecured, real property, PPSA)
- Draft covenants and financial ratios approved
The workflow
Review the term sheet and credit paper
Read the term sheet and credit approval. List every commercial point — amount, term, margin, fees, covenants, security — that must land in the agreement.
Draft facility and drawdown clauses
Draft the commitment, availability period, purpose clause, and drawdown mechanics. Include any utilisation conditions or drawdown notice requirements.
Draft interest, fees, and repayment
Draft interest calculation (BBSW or fixed), default interest, fees, and the repayment schedule or bullet clause. Include break cost mechanics if relevant.
Draft representations and warranties
Draft borrower representations — authority, binding obligations, no default, accuracy of information, litigation, solvency — and the repetition clause.
Draft undertakings and financial covenants
Draft positive and negative undertakings plus any financial covenants (gearing, interest cover, minimum EBITDA). Align with the credit approval.
Draft events of default and acceleration
Draft events of default — payment default, cross-default, insolvency, breach of covenant, material adverse change — and the acceleration mechanism.
Draft or reference security documents
Draft or reference the security documents — general security deed, real property mortgage, guarantees — and ensure PPSA registration requirements are captured.
Conditions precedent and execution
Draft the conditions precedent schedule, finalise execution blocks, and walk the client through signing logistics and post-closing registrations.
What you will have at the end
An executed loan agreement aligned with the term sheet and credit approval, with conditions precedent satisfied and any security properly registered on the PPSR.
Common issues
- Margin and fees drifting between the term sheet and final agreement
- PPSA registration missed or deferred past the critical window
- Events of default too narrow for the lender's risk profile
- Cross-default drafted without a threshold, triggering on immaterial defaults
- Guarantees not supported by a guarantor solvency resolution
Run this workflow on a real matter
Quillio drafts facility clauses from your term sheet, checks alignment between credit approval and covenants, and produces a CP schedule. See /practice-areas/commercial-lawyers or /free-trial.
General guide only — not legal advice. Adapt for each transaction and confirm current PPSA and consumer credit position where applicable.
Try this workflow with Quillio.
Quillio can run this workflow on a real matter, with citations to current AU authority on every step. The free trial requires no credit card.
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