The loan agreement includes terms for repayment and other stipulations necessary to have a good understanding with your lender. There are generally three types of loan agreements: affirmative, negative, and financial. Affirmative agreements require you to perform certain activities, such as purchasing specific insurance or providing financial statements on a regular basis. Negative agreements prevent you from doing things, such as taking on additional debt, without your lender's knowledge and approval. Financial agreements describe what your business needs to produce financially to maintain your loan, such as a certain minimum level of pre-tax earnings. If you violate a loan agreement, your lender has the right to withdraw the loan, stop any additional loans, seize collateral property, or take legal action against your business.
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