Forgivable Loan Promissory Note for Australia

Forgivable Loan Promissory Note Template for Australia

A Forgivable Loan Promissory Note is a legally binding financial document used in Australian jurisdiction that combines elements of a traditional promissory note with specific provisions for loan forgiveness. The document outlines the terms under which a borrower promises to repay a loan to a lender, while also detailing specific conditions or criteria that, when met, would result in partial or complete forgiveness of the loan amount. It includes essential elements such as the principal amount, payment schedule, interest rates (if applicable), forgiveness conditions, and default provisions, all structured in compliance with Australian financial services regulations and contract law.

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What is a Forgivable Loan Promissory Note?

The Forgivable Loan Promissory Note is a specialized financial instrument commonly used in Australian business and lending practices when organizations want to provide financial support with an incentive structure built in through loan forgiveness. This document type is particularly useful in situations such as employee retention programs, business development initiatives, educational funding, or economic development projects where the lender wishes to encourage certain behaviors or achievements through the promise of debt forgiveness. The document must comply with Australian financial services regulations, including the National Consumer Credit Protection Act and the National Credit Code where applicable. It combines standard promissory note elements with detailed conditions for forgiveness, making it a valuable tool for structuring performance-based or condition-based lending arrangements.

What sections should be included in a Forgivable Loan Promissory Note?

1. Parties: Identification of the lender and borrower, including full legal names and addresses

2. Background: Context of the loan, relationship between parties, and purpose of the forgivable loan

3. Definitions: Key terms used throughout the document, including specific definitions related to forgiveness conditions

4. Loan Amount and Terms: Principal amount, interest rate (if any), and payment schedule

5. Promise to Pay: Formal promise by the borrower to repay the loan according to the specified terms

6. Forgiveness Provisions: Detailed conditions under which the loan may be forgiven, including qualifying criteria and timeline

7. Repayment Terms: Schedule of payments, payment methods, and handling of early repayment

8. Default Provisions: Events constituting default and consequences thereof

9. Representations and Warranties: Statements of fact and promises made by the borrower regarding their situation and intentions

10. Notices: How and where formal communications between parties should be made

11. Governing Law: Specification of Australian law as governing law and jurisdiction

What sections are optional to include in a Forgivable Loan Promissory Note?

1. Security: Details of any collateral or security for the loan, used when the loan is secured

2. Guarantor Provisions: Terms applying to guarantors, included when there is a third-party guarantee

3. Special Conditions: Any unique terms or conditions specific to this loan arrangement

4. Tax Implications: Statement of tax consequences of loan forgiveness, included when significant tax implications exist

5. Reporting Requirements: Specific reporting obligations to demonstrate compliance with forgiveness conditions

6. Amendment Process: Procedures for modifying the agreement, included for complex or long-term arrangements

7. Assignment Rights: Terms regarding the ability to transfer rights under the note, included when relevant

What schedules should be included in a Forgivable Loan Promissory Note?

1. Schedule A - Payment Schedule: Detailed breakdown of payment dates and amounts

2. Schedule B - Forgiveness Criteria: Specific metrics or milestones that trigger loan forgiveness

3. Schedule C - Calculation of Forgiveness: Formula or methodology for calculating the amount to be forgiven

4. Schedule D - Required Documentation: List of documents required to demonstrate compliance with forgiveness conditions

5. Appendix 1 - Defined Terms: Extended definitions of technical terms used in the agreement

6. Appendix 2 - Form of Forgiveness Notice: Template for formal notification of loan forgiveness

Authors

Alex Denne

Head of Growth (Open Source Law) @ Genie AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Jurisdiction

Australia

Publisher

Genie AI

Document Type

Loan Agreement

Sector

Cost

Free to use
Relevant Industries

Banking and Financial Services

Education and Training

Healthcare

Government and Public Sector

Not-for-Profit

Small Business

Professional Services

Agriculture

Technology and Startups

Economic Development

Relevant Teams

Legal

Finance

Treasury

Compliance

Risk Management

Human Resources

Credit Administration

Corporate Governance

Accounting

Business Development

Relevant Roles

Chief Financial Officer

Finance Manager

Legal Counsel

Loan Officer

Credit Manager

Compliance Officer

Financial Controller

Treasury Manager

Risk Manager

Business Development Manager

Human Resources Director

Corporate Secretary

Financial Analyst

Accounting Manager

Industries
Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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