The Interest Only Loan Contract is commonly used in Canadian lending transactions where borrowers seek flexible payment terms or temporary financial structuring. This type of agreement is particularly useful in scenarios such as property development, business expansion, or investment opportunities where cash flow management is crucial. The contract must comply with Canadian federal legislation including the Interest Act and Criminal Code interest rate provisions, as well as applicable provincial laws. It typically includes detailed provisions for interest calculation methods, payment schedules, borrower covenants, and default remedies. The document is essential for both institutional and private lending arrangements, providing clear terms for interest-only payments while securing the lender's right to principal repayment at maturity.
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1. Parties: Identifies and provides full legal details of the lender and borrower
2. Background: Explains the context of the loan agreement and the parties' intention to enter into an interest-only arrangement
3. Definitions: Defines key terms used throughout the agreement including 'Interest Rate', 'Interest Payment Date', 'Principal Sum', 'Term', and 'Default'
4. Loan Amount and Purpose: Specifies the principal amount being lent and the agreed purpose of the loan
5. Interest Rate and Calculations: Details the interest rate, calculation method, and compliance with the Interest Act
6. Interest Payment Terms: Specifies when and how interest payments must be made, including payment dates and methods
7. Term and Repayment: Outlines the duration of the loan and conditions for repayment of the principal sum
8. Representations and Warranties: States the borrower's declarations regarding their legal capacity and financial condition
9. Borrower's Covenants: Lists ongoing obligations of the borrower during the term of the loan
10. Events of Default: Defines circumstances that constitute default and the consequences thereof
11. Remedies: Outlines the lender's rights and remedies upon default
12. Notices: Specifies how formal communications between parties must be made
13. General Provisions: Includes standard clauses such as governing law, assignment, and amendments
1. Security: Include when the loan is secured by assets or guarantees
2. Guarantee: Include when there is a guarantor for the loan
3. Insurance Requirements: Include when insurance on secured assets or life insurance is required
4. Prepayment Rights: Include when early repayment of principal is permitted
5. Interest Rate Adjustment: Include when interest rate may vary during the term
6. Tax Provisions: Include when tax implications need specific addressing
7. Multiple Borrowers: Include when there is more than one borrower to address joint liability
8. Currency Provisions: Include when the loan or payments involve multiple currencies
1. Schedule A - Payment Schedule: Detailed schedule of interest payment dates and amounts
2. Schedule B - Interest Rate Calculation Method: Detailed explanation of interest calculation including examples
3. Schedule C - Security Details: Description of any security or collateral if applicable
4. Schedule D - Permitted Purpose: Detailed description of the permitted use of loan funds
5. Schedule E - Banking Details: Account details for making payments
6. Appendix 1 - Compliance Certificate: Form for periodic confirmation of compliance with loan terms
7. Appendix 2 - Notice of Drawdown: Form for requesting loan disbursement if multiple draws are permitted
8. Appendix 3 - Guarantor Confirmation: Form for guarantor acknowledgment if applicable
Relevant legal definitions
Accrued Interest
Applicable Law
Banking Day
Borrower
Business Day
Change of Control
Closing Date
Default
Default Interest Rate
Default Notice
Draw Down
Draw Down Date
Due Date
Effective Date
Event of Default
Financial Indebtedness
Financial Statements
Financial Year
Guarantor
Interest Only Period
Interest Payment Date
Interest Rate
Interest Rate Adjustment Date
Lender
Loan
Material Adverse Effect
Maturity Date
Notice
Parties
Payment Account
Permitted Purpose
Principal Amount
Principal Repayment Date
Relevant Jurisdiction
Repayment Schedule
Security
Security Documents
Tax
Term
Transaction Documents
Applicable Law
Banking Day
Borrower
Business Day
Change of Control
Closing Date
Default
Default Interest Rate
Default Notice
Draw Down
Draw Down Date
Due Date
Effective Date
Event of Default
Financial Indebtedness
Financial Statements
Financial Year
Guarantor
Interest Only Period
Interest Payment Date
Interest Rate
Interest Rate Adjustment Date
Lender
Loan
Material Adverse Effect
Maturity Date
Notice
Parties
Payment Account
Permitted Purpose
Principal Amount
Principal Repayment Date
Relevant Jurisdiction
Repayment Schedule
Security
Security Documents
Tax
Term
Transaction Documents
Clauses
Loan Amount
Interest Rate
Interest Payment
Principal Repayment
Representations and Warranties
Conditions Precedent
Security
Covenants
Events of Default
Remedies
Payment Mechanics
Tax Gross-up
Increased Costs
Set-off
Assignment and Transfer
Amendments and Waivers
Notices
Confidentiality
Force Majeure
Governing Law
Jurisdiction
Dispute Resolution
Severability
Entire Agreement
Counterparts
Further Assurance
Costs and Expenses
Indemnification
Term and Termination
Insurance
Security Registration
Change of Control
Financial Covenants
Information Covenants
Acceleration
Interest Rate
Interest Payment
Principal Repayment
Representations and Warranties
Conditions Precedent
Security
Covenants
Events of Default
Remedies
Payment Mechanics
Tax Gross-up
Increased Costs
Set-off
Assignment and Transfer
Amendments and Waivers
Notices
Confidentiality
Force Majeure
Governing Law
Jurisdiction
Dispute Resolution
Severability
Entire Agreement
Counterparts
Further Assurance
Costs and Expenses
Indemnification
Term and Termination
Insurance
Security Registration
Change of Control
Financial Covenants
Information Covenants
Acceleration
Relevant Industries
Financial Services
Banking
Real Estate
Commercial Property
Private Lending
Investment Management
Construction
Property Development
Small Business
Agriculture
Relevant Teams
Legal
Finance
Credit Risk
Compliance
Commercial Banking
Corporate Lending
Investment
Operations
Treasury
Business Development
Relevant Roles
Chief Financial Officer
Finance Manager
Credit Manager
Loan Officer
Legal Counsel
Risk Manager
Commercial Banker
Mortgage Specialist
Corporate Treasurer
Financial Controller
Compliance Officer
Business Development Manager
Account Manager
Investment Manager
Property Development Manager
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