INTRODUCTION TO LOAN AGREEMENT IN CAMEROON
In order to execute large projects or for businesses to expand, there is usually a need to brief a corporate lawyer for legal assistance before applying for a loan facility from individuals or companies. Though, money Lenders are likely to grant loans to Borrowers if they have the requisite collateral, most times Borrowers end up in trouble either because they cannot pay back the repayment instalments as at when due; or the interest rate on the loan facility is too high; or they breached an important covenant of the Loan Agreement in Cameroon or they simply did not understand the risks and obligations before signing Loan Agreement.
LEGAL ASSISTANCE FOR LAON AGREEMENT IN CAMEROON
The Borrowers must seek legal assistance for Loan Agreement in Cameroon to ensure the following covenants are inserted in the Loan Agreement so as to reduce disputes that may result due to lack of clearness in the loan agreement. Covenants are undertaken in a loan agreement to regulate the actions of parties.
1. THE COLLATERAL PROVISION
The Borrower must ensure that it has the collateral stated in the Loan Agreement and the evaluation of the collateral must be as envisaged in the Agreement. If the collateral is to be provided by a third party, the Borrower must ensure that the third party provides the specified collateral timeously. The Borrower must ensure the third party binds with additional collateral.
2. THE INTEREST RATE PROVISION
The Borrower must ascertain if the Loan is subject to an interest rate and whether he/she will be able to pay the interest rate on the loan sum.
3. REPAYMENT PROVISION FOR LOAN AGREEMENT
There are different repayment schedules for the liquidation of the loan sum. Legal Assistance for loan agreement is necessary so as to determine which payment schedule (equal payments, equal instalments, fixed equal instalment, bullet repayment and instalment-free period) and the exact date for repayment. The Borrower must ascertain whether the repayment schedule proposed by the Lender is convenient to it and its line of business.
4. COMMENCEMENT DATE PROVISION
The Borrower must ensure that the date of disbursement of the loan sum is in line with the purpose for which it requires the loan before signing the loan agreement. This will prevent it from incurring interest payments for inactive periods.
5. CONDITIONS OF LOAN PROVISION
In some Agreements, the Lender may withhold, recall or even cancel the loan facility if the Borrower fails to use the loan for the purpose it was granted; diverts repayment instalments to other ventures; breaches obligations under the Agreement; fails to repay the agreed instalments for a period of time; makes material misrepresentation regarding facts which induced the Lender to grant the loan or the value of the collateral depreciates.
6. EVENTS OF DEFAULT PROVISION
Some Agreements provide that if the Borrower is unable to pay its debt the Lender reserves the right to take possession of the collateral or initiate a debt recovery measure at the competent judicial institution at the full cost of the borrower.
7. COVENANTS PROVISIONS
The loan Agreement may restrict both the Lender and Borrower from using the security the collateral security during the subsistence of the loan.
From the foregoing, it is important for Borrowers to seek legal assistance for a loan agreement so as to understand and evaluate the risks in the Agreement before signing the loan agreement and ensure it meets the standard requirement.
Article by MAFANY victor NGANDO
Kinsmen Advocates Law Firm
“The content of this article is intended to provide a general guide to the subject matter. Specialist advise should be sought about your specific circumstance”.