Commercial & Corporate

Loan agreements and personal guarantees

Lending money to a relative, a friend or a business partner, or being asked to guarantee someone else's debt, is where a short written document can prevent a great deal of trouble. Sun Lawyers drafts and reviews loan agreements, security documents and guarantees, and advises guarantors before they sign. We work in English, Mandarin and Cantonese.

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When you need this

You are lending to, or borrowing from, a relative, friend or business partner.
You are lending money to your own company, or to a company you have invested in.
You are a director who has been asked to guarantee a lease, a supplier account or a bank loan.
A parent or spouse has been asked to guarantee a business debt.
An old loan was never written down and you want it recorded.

What we do

Draft a loan agreement covering the amount, interest, repayment dates, default and security.
Document the security for the loan and attend to its registration.
Review a guarantee before you sign and negotiate limits on it.
Prepare a written acknowledgment or variation for an existing loan.
Act for lenders and guarantors when a loan is not repaid.

Points worth knowing

In NSW an action to recover a debt under a contract must be started within 6 years after the right to sue first arises. When that period ends, the right to the debt is extinguished.
Where a loan is simply repayable on demand, the courts have treated the debt as owing from the day the money is lent, so the 6 years generally run from that day and not from the day repayment is requested. A written agreement with a fixed repayment date, or with repayment due a set time after demand, is the usual way to avoid this problem.
Time starts again if, before the period ends, the borrower acknowledges the debt in signed writing or makes a payment towards it.
If the loan is made by deed, the period is 12 years.
The National Credit Code applies only where the borrower is an individual or a strata corporation, the money is wholly or mainly for personal, domestic or household purposes or for residential investment property, a charge is or may be made for the credit, and the lender provides the credit in the course of a business of providing credit, or as part of or incidentally to another business of the lender. A single private loan will usually fall outside the Code. A person must not engage in a credit activity without a licence, so anyone who lends as a business needs advice first.
Many guarantees allow the creditor to pursue the guarantor as soon as the borrower defaults, without first taking action against the borrower. Many are also unlimited and cover future debts. Resigning as a director or selling your shares does not by itself end a guarantee.
Security over equipment, vehicles, stock or other personal property should be registered on the Personal Property Securities Register (PPSR). An unregistered security interest can be lost if the borrower becomes bankrupt, or if a company borrower goes into liquidation or administration. For a company borrower, registration should generally be made within 20 business days after the security agreement comes into force.

How we work

01
A first conversation in English, Mandarin or Cantonese about who is lending to whom, how much, and what has already been agreed.
02
Before any work starts, we confirm the scope of work and our fees in writing.
03
We draft or review the documents, explain them in plain language, and arrange signing and any registration.

Common questions

It is a loan within the family. Is a written agreement really necessary?

It protects both sides. It records that the money is a loan and not a gift, when it is to be repaid, and whether interest is payable. It can also deal with the time limit problem that affects loans simply repayable on demand.

I signed a guarantee years ago and have since left the company. Am I still liable?

Possibly. Leaving the company or selling your shares does not by itself release a guarantee, and many guarantees cover debts incurred later. It depends on the wording and on whether the creditor has released you in writing. We can review the document and advise on seeking a release.

Can a guarantee be limited?

It can be, and the time to raise it is before signing. Common limits are a cap on the amount, restricting the guarantee to one named debt or lease, and an end date or release event.

Related legal services

Shareholders' agreements and investing in a company

Commercial and retail leases in NSW

Buying or selling a business

Debt recovery and statutory demands

Shareholder and business partner disputes

Commercial contracts

Franchising

Building and construction disputes

Mediation and dispute resolution

Court representation

Commercial & Corporate →

This page is general information about the law applying in New South Wales and is not legal advice. Please contact us about your own situation.

Last updated: October 2026