Sub Loan Agreement Template for Australia

A Sub Loan Agreement is a specialised financing document that establishes a subordinated lending arrangement where your loan sits below senior debt in the repayment hierarchy. This agreement is crucial when you need additional funding but existing senior lenders must maintain their priority position. The document carefully structures the relationship between you as the borrower, the subordinated lender, and any senior creditors to ensure compliance with Australian financial services law.

When do you need this document?

You need a Sub Loan Agreement when seeking additional financing while senior debt facilities are already in place or planned. This commonly occurs in corporate acquisitions where mezzanine financing complements senior bank facilities, property development projects requiring staged funding from multiple sources, or business expansions where additional capital is needed without disturbing existing banking relationships. The agreement is also essential when family members or investors provide subordinated loans to support business growth, or when restructuring existing debt to include new subordinated facilities.

Key legal considerations

The subordination provisions are the most critical aspect of this agreement, clearly defining when the subordinated lender can receive payments and enforce their rights. You must carefully structure interest payment terms to avoid conflicts with senior debt covenants, and ensure default provisions align with senior facility requirements. Security arrangements require particular attention under the Personal Property Securities Act 2009, as subordinated security interests must be properly registered and ranked. The agreement should include comprehensive intercreditor provisions, standstill periods that prevent the subordinated lender from enforcing rights during certain periods, and turnover provisions requiring payments to senior lenders in specific circumstances.

Legal requirements in Australia

Sub Loan Agreements must comply with the National Consumer Credit Protection Act 2009 if the borrower is a consumer, requiring appropriate licensing and responsible lending assessments. Corporate borrowers fall under the Corporations Act 2001, which governs financial services arrangements and director duties regarding debt facilities. The Personal Property Securities Act 2009 applies to any secured subordinated loans, requiring registration on the Personal Property Securities Register to perfect security interests. Privacy Act 1988 compliance is mandatory for handling personal information during credit assessments. The Australian Securities and Investments Commission Act 2001 provides additional consumer protections against unfair contract terms, and you must ensure the agreement meets unconscionable conduct provisions under Australian Consumer Law.