Sample Borrower & Lender Agreements

The following are sample lender and borrower agreements. They are shared here as an example of what you can expect as a lender or borrower. Actual agreements are subject to change as directed by staff and members of the Loan Committee.

SAMPLE AGREEMENT BETWEN CML AND LENDER

This Agreement Is Made Between
Victoria Community Micro Lending Society
a society incorporated under the laws of
British Columbia “CML”

-and-

the “Lender”

Background

A. CML provides access to credit to people living in or near poverty who cannot effectively finance even the smallest business venture and who want to borrow money in order to start or expand a business in their community (the “Purpose”).

B. By this agreement, the Lender applies for membership in CML and indicates a desire to reduce poverty and support for the Purpose and actions of CML and a desire to loan money to CML to assist it in its Purpose.

C. CML receives and deals with applications for loans in the following manner:

– Applicant approaches CML;
Applicant meets with CML staff;
– Applicant applies to CML and the application includes
– a business plan;
– two letters of reference;
– consent to a criminal record check;
– employment history;
– amount of loan requested;
– other relevant information;
– copy of their credit bureau report;
– CML staff review the application and follow up with applicant;
– When they think application is ready, CML staff refer the application to the – CML Loan Committee;
– CML Loan Committee reviews the application and meets with applicant;
– CML Loan Committee approves or denies loan application;
– If application approved, CML attempts to find money to loan to applicant;
– Applicant works with CML staff to complete “Personal Road Map To Success”;
– Applicant receives loan and is connected with mentor and becomes part of CML entrepreneur community.

D. At the request of the Lender, CML has provided the Lender with information about applicants and the loans they seek and purposes for which they seek the loans.

E. After reviewing the applications, the Lender instructs CML that the money he/she/they loan to CML is to be re-loaned by CML to the entrepreneurs chosen by the Lender (the “Entrepreneur”).

Now Therefore, in consideration of the mutual covenants contained in this Agreement, the Lender and CML agree as follows.

Loan By Lender To CML

1. The Lender loans to CML the amount entered in the “Lend Now” box by the Lender (the “Loan”).

Use Of Loan By CML

2. CML agrees to use the Loan only in accordance with Lender’s instructions as set out in the “Lend Now” box. However, CML has the right to use the interest, or any other amount, earned on the Loan in any manner CML thinks appropriate, including the payment of administrative and operating expenses of CML. The Lender will not receive a charitable tax receipt for this interest.

3. It may be that the Loan is not large enough to fully fund the CML loan to the Entrepreneur. To the extent that the Loan is not immediately loaned to the Entrepreneur, CML is entitled to deposit the Loan in an interest bearing account of CML.

Interest On Loan

4. CML will pay interest to the Lender on any portion of the Loan advanced to the Entrepreneur and not yet prepaid to the Lender at the rate of 2% per year, calculated daily but the obligation to pay this interest is subject to the provisions in the following section entitled “Repayment of Loan”.

5. The interest rate paid by CML on the Loan is below market interest rates. The Lender acknowledges that he/she/they has agreed to accept this lower rate in order to assist CML in its Purpose.

6. The interest rate charged by CML on the loans it makes may bear no relationship to the interest rate CML pays on the Loan. At this time, CML charges interest at the rate of 5% per year on the loans it makes and CML reserves the right to charge interest at any rate it thinks appropriate.

Repayment Of Loan

7. CML is obliged to repay the Loan and interest on the Loan only if it receives repayment from the Entrepreneur.

8. Subject to the provisions as to quarterly payments in the next clause, CML becomes obligated to pay the Lender at the earlier of:

– the receipt by CML of all principal and interest owing under CML’s loan to the Entrepreneur; or
– a decision by CML to write off the loan it has made to the Entrepreneur.

9. CML will make payments to the Lender quarterly, as follows:

– If CML becomes obligated to pay the Lender in January, February or March, CML will pay the Lender in April;

– If CML becomes obligated to pay the Lender in April, May or June, CML will pay the Lender in July;

– If CML becomes obligated to pay the Lender in July, August or September, CML will pay the Lender in October;

– If CML becomes obligated to pay the Lender in October, November or December, CML will pay the Lender in January.

10. From each payment received by CML from the Entrepreneur, CML will deposit the principal portion of that payment and 20% of the interest portion of that payment into an account in which CML holds funds for eventual repayment to lenders.

11. The amount to be paid by CML to the Lender is the total of all principal funds received by CML from the Entrepreneur and 20% of the interest received by CML from the Entrepreneur. For greater clarity, the Society is not obligated to pay interest to the Lender on any funds the Society has received from the Entrepreneur but not yet paid to the Lender.

12. CML may write off its loan to the Entrepreneur whenever CML thinks such a write off is appropriate. If the loan to the Entrepreneur is not repaid within six months from the time repayment was due, CML will write off the loan, unless CML then determines that such a write off would not be appropriate.

13. Should CML receive payments from the Entrepreneur after CML has written off its loan to the Entrepreneur, the Society will, in the next quarterly payment, pay the appropriate amount to the Lender. In determining the appropriate amount to be paid to the Lender, CML will consider any payment the Lender has received from CML’s Loan Loss Reserve Fund.

Loan Has Risk And Loan Is Unsecured

14. The Lender acknowledges that he/she/they understand that loans to enable the start or expansion of a business are inherently risky, that the risk is even greater if the Entrepreneur has limited capital and/or little or no business experience and that, despite the best efforts of CML, the Entrepreneur may not repay CML’s loan. The obligation of CML to repay the Lender is limited by the amount the Entrepreneur pays CML and so the Lender will suffer a loss if the Entrepreneur fails to repay the loan from CML.

15. The Loan is unsecured. CML is not granting the Lender a mortgage or charge on any of its property. Although CML will reloan the Loan, the Lender will have no right to look for repayment to the Entrepreneur.

Release As To Actions Of Mentors

16. CML intends to arrange for one or more volunteer members of the community to act as mentors to the Entrepreneur but CML cannot guarantee the actions, performance or advice of the mentors. The Lender acknowledges that the mentors are members of the community who volunteer to act as mentors, that the mentors may not always be available when wanted by the Entrepreneur, that the mentor may not have any expertise in the Entrepreneur’s business and that the mentor may not give the Entrepreneur the best advice in any situation. In consideration for the services provided to the Lender and to the Entrepreneur chosen by the Lender, and in particular in return for the actions of CML in arranging, monitoring and collecting the loan to the Entrepreneur, the Lender herby releases CML and each mentor from any claim the Lender may have arising from any action or inaction of a mentor, including any mistake or negligence of a mentor or any failure of a mentor to act as would normally be expected of that mentor.

Ethics In Relation To Entrepreneurs

17. The Lender recognizes that payments from the Entrepreneur will be made to CML and not directly to the Lender. Therefore, the Lender agrees not to contact the Entrepreneur about loan repayment.

General Provisions

18. This Agreement constitutes the entire agreement between the Lender and CML as to the Loan and there are no other agreements, stipulations or provisions, written or verbal, between the Lender and CML relating to the Loan.

19. No change to his Agreement is effective unless it is made in writing and signed by both parties to this Agreement.

20. Any waiver by either party of the strict observance and compliance by the other with all provisions in this Agreement and any indulgence granted by either party to the other are effective only in the specific instance and for the purposes for which it was given and is not a waiver of any rights or remedies that the waiving party has under this Agreement.

21. The Lender agrees to receive correspondence by email, by mail or by personal delivery. All notices and other communications will be given as follows:

The Lender may correspond with CML by email to info@comunitymicrolending.ca
Either party may change its address or its email address by notice to the other;

– Any notice sent by email is deemed to be received at 10:am on the day following transmission;

– Any notice sent by mail is deemed to be received three days after it is deposited, postage prepaid , in a post office letter box;

– Any notice delivered personally to the Lender is received at the time of delivery.

22. The Loan Agreement is governed by, and shall be construed in accordance with, the Laws of British Columbia and the laws of Canada.

23. The unenforceablity of any provision of this Agreement shall not affect the enforceablilty or validity of any other provision.

SAMPLE BORROWER AGREEMENT

This Agreement is Made Between

Victoria Community Micro Lending Society
a Society incorporated under the laws
of the Province of British Columbia
(“VCMLS”)

and

BORROWER’S NAME
(the “Entrepreneur”)
Background

A. VCMLS provides access to credit to low income residents of the greater Victoria area who want to borrow money in order to start or expand a business in their community.

B. The Entrepreneur has applied to VCMLS for a loan to begin or expand a business (the “Business”) and, by means of the commitment letter signed by both VCMLS and the Entrepreneur, a copy of which is attached to and forms Schedule A to this Agreement, VCMLS has agreed to loan, and the Entrepreneur has agreed to borrow, the sum of $AMOUNT.

Now therefore, in consideration of the mutual covenants contained in this Agreement, VCMLS and the Entrepreneur agree as follows.

Loan

1. VCMLS loans to the Entrepreneur the sum of $AMOUNT (the “Loan”). The Loan bears interest at the rate of 5.0% per year, calculated daily and compounded yearly, not in advance, on the amount of the Loan unpaid from time to time.
2. The Loan is advanced in one advance in accordance with the provisions of Schedule A to this Agreement.

Repayment of Loan

3. The Entrepreneur agrees to repay the Loan, together with interest at the rate set out above, in lawful money of Canada in the following manner:

Monthly automatic payments of AMOUNT on the 1st OR 20th of each month beginning DATE.

4. All repayments are to be made by automated withdrawal from the Entrepreneur’s account in a bank or credit union to Vancity Branch number ##, Account number NUMER

5. All payments will be applied firstly to any fees outstanding, then to accrued interest and then to payment of the Loan Principal.

6. The Entrepreneur is entitled to prepay all, or any portion of the Loan, at any time without notice, penalty or bonus.

Agreements Of The Entrepreneur

7. The Entrepreneur agrees to obey all laws, regulations and legal requirements in operating the Business.

8. The Entrepreneur agrees to obtain and maintain all licenses and permits necessary to operate the Business and to provide to VCMLS evidence of such permits and licenses, in a form satisfactory to VCMLS, whenever requested to do so by VCMLS.

Default

9. The Entrepreneur is in default under the terms of this Agreement in the following situation:

a. the Entrepreneur fails to pay any amount owing under this Loan Agreement, including Schedule A, when it is due, unless the Entrepreneur has the prior written agreement of VCMLS that he/she/they/it need not make the payment;

Consequences of Default
10. If the Entrepreneur is in default under this Agreement, VCMLS may, in its sole discretion, take all or any of the following actions:

a. VCMLS may take any action legally allowed to enforce its rights under this Loan Agreement or under any other agreement with the Entrepreneur to obtain payment of the amount owing under the Loan and of any other amount owing by the Entrepreneur to VCMLS.

General Provisions

11. This Agreement, including the attached Schedule A, constitutes the entire agreement between the Entrepreneur and VCMLS as to the Loan and there are no other agreements, stipulations or provisions, written or verbal, between the Entrepreneur and VCMLS which relate to the Loan.

12. No change to this Agreement is effective unless:

a. it is made in writing and signed by both parties to agreement; or

b. it is contained in an exchange of emails between the Entrepreneur and VCMLS.

13. In making this Loan, VCMLS relied on the application of the Entrepreneur, on the representations made by the Entrepreneur and on its evaluation of the Entrepreneur and VCMLS would not have agreed to make this Loan to another Entrepreneur. This Loan is the responsibility of the Entrepreneur and cannot be assumed by any other Entrepreneur.

14. All notices and other communication will be given as follows:

a. To the Entrepreneur in any of the following methods:
i. by mail to ____________________________________________________; or
ii. by email to ____________________
iii.by personal delivery to the Entrepreneur.

b. To VCMLS as follows:

i. by email to info@communitymicrolending.ca

c. Either party may change its address or its email address by notice to the other.

15. This Loan Agreement is governed by, and shall be construed in accordance with, the laws of British Columbia and the laws of Canada.

SCHEDULE A TO LOAN AGREEMENT BETWEEN VICTORIA COMMUNITY MICRO LENDING SOCIETY (“VCMLS”) AND (THE “Entrepreneur”)

A. Purpose of Loan
This loan is to allow the Entrepreneur to DESCRIPTION OF WHAT LOAN IS TO BE SPENT ON.

B. The Business
The business consists of DESCRIPTION OF BUSINESS.

C. Loan Advances
– The loan will be made in one advance within 5 days of the Borrower signing the loan agreement

D. Conditions Of Advance Of The Loan

All of the following conditions must be met before VCMLS advances the Loan.
– All the information contained in the Borrower’s application must still be true and accurate.
– The Borrower must provide to VCMLS, in a form satisfactory to VCMLS, documentation showing plans for the operation of the business activities related to the loan.
– The Borrower must agree that, if unable to make a payment when due, VCMLS will be notified of this situation at least one week before the date on which the payment is due.

Have questions? Let's connect.

Whether you’re new to lending or borrowing or an impact investor looking to learn more, we’re happy to walk you through our loan process and answer your questions.

Email loans@communitymicrolending.ca with your questions or to set up a time to talk.