• FreeAdvice has a new Terms of Service and Privacy Policy, effective May 25, 2018.
    By continuing to use this site, you are consenting to our Terms of Service and use of cookies.

Loan Repayment

Accident - Bankruptcy - Criminal Law / DUI - Business - Consumer - Employment - Family - Immigration - Real Estate - Tax - Traffic - Wills   Please click a topic or scroll down for more.

gillman8

Junior Member
What is the name of your state (only U.S. law)? Alabama company

Hi All!

The company I have joined have a loan from an existing shareholder. In the loan agreement there is nothing to determine how any payments will be applied. We have begun initiating payments against this loan, and I'm not sure if the payments are applied against principal, interest, or a combination. There is existing accrued interest against the loan also.
 


quincy

Senior Member
What is the name of your state (only U.S. law)? Alabama company

Hi All!

The company I have joined have a loan from an existing shareholder. In the loan agreement there is nothing to determine how any payments will be applied. We have begun initiating payments against this loan, and I'm not sure if the payments are applied against principal, interest, or a combination. There is existing accrued interest against the loan also.
If the loan to the company is from "an existing shareholder," perhaps the easiest way to figure the agreement out is to ask the existing shareholder.
 

gillman8

Junior Member
If the loan to the company is from "an existing shareholder," perhaps the easiest way to figure the agreement out is to ask the existing shareholder.
Company is not on the best of terms with said shareholder at the moment. Said shareholder is attempting to stand up another company using technology / ideas stolen from company, but that is a separate issue :)
Trying to determine what the default scenario would be in this situation with no formal agreement. Ideally we as the company could, at our own discretion, apply payments against principal.
 

quincy

Senior Member
Company is not on the best of terms with said shareholder at the moment. Said shareholder is attempting to stand up another company using technology / ideas stolen from company, but that is a separate issue :)
Trying to determine what the default scenario would be in this situation with no formal agreement. Ideally we as the company could, at our own discretion, apply payments against principal.
A review of the payment history should show you how the payments are being applied.

There is, by the way, a formal agreement. You just don't happen to know what this agreement is, perhaps because you are new to the company. Why are you being asked to figure this out?
 

gillman8

Junior Member
A review of the payment history should show you how the payments are being applied.

There is, by the way, a formal agreement. You just don't happen to know what this agreement is, perhaps because you are new to the company. Why are you being asked to figure this out?
Thank you for the replies quincy :)

We have just made the first payment, so there is no history. I have the loan agreement in hand. There is nothing that outlines how payments are applied. There is principal and simple interest, a maturity date, and no requirement to pay monthly interest. A few months ago the company agreed to make monthly payments that just started, without specifying how these payments were to be applied.
 

quincy

Senior Member
Thank you for the replies quincy :)

We have just made the first payment, so there is no history. I have the loan agreement in hand. There is nothing that outlines how payments are applied. There is principal and simple interest, a maturity date, and no requirement to pay monthly interest. A few months ago the company agreed to make monthly payments that just started, without specifying how these payments were to be applied.
I am puzzled about the "accrued interest" you mentioned earlier.

What was the loan for?

If the loan is to be paid in full by the date of maturity, you should be able to figure out from the payment amount and the interest how the payments are to be applied. Does the agreement mention a balloon payment?

Whoever drafted the loan agreement should be prohibited from drafting loan agreements in the future. ;)
 
Last edited:

gillman8

Junior Member
I am puzzled about the "accrued interest" you mentioned earlier.

What was the loan for?

If the loan is to be paid in full by the date of maturity, you should be able to figure out from the payment amount and the interest how the payments are to be applied. Does the agreement mention a balloon payment?

Whoever drafted the loan agreement should be prohibited from drafting loan agreements in the future. ;)
The company is a startup, and the loan was for advancement of the business in anticipation of a larger funding round in the future.

The objective was for the loan and interest to be repaid upon funding. This funding has not occurred, but the company has continued to function and agreed to make small monthly payments.
the agreement does not mention the word balloon, but the agreement does effectively call for a balloon payment in that, at maturity all interest and principal are payable. By accrued interest I mean, the amount of interest that has been generated on the loan agreement.

A bit more history, the loan was made about a year ago, and interest has built up over that time, but only recently did the company begin / agree to make small payments.
 
Last edited:

quincy

Senior Member
The company is a startup, and the loan was for advancement of the business in anticipation of a larger funding round in the future.

The objective was for the loan and interest to be repaid upon funding. This funding has not occurred, but the company has continued to function and agreed to make small monthly payments.
the agreement does not mention the word balloon, but the agreement does effectively call for a balloon payment in that, at maturity all interest and principal are payable. By accrued interest I mean, the amount of interest that has been generated on the loan agreement.

A bit more history, the loan was made about a year ago, and interest has built up over that time, but only recently did the company begin / agree to make small payments.
Okay.

Well, before this loan repayment agreement winds up in court with both parties claiming different amounts paid or owing and a judge having to puzzle over what to do (possibly to the company's detriment), I recommend a representative from your company sits down with an attorney and the shareholder and rewrite the agreement to clarify all terms that are currently unclear.

Especially if the shareholder and the company are already at odds with each other, clarifying the agreement now would seem the smart thing to do.
 

Find the Right Lawyer for Your Legal Issue!

Fast, Free, and Confidential
data-ad-format="auto">
Top