Upgrad LLM

loan agreement to be made for loan to friend for business


I am a salaried person getting a good monthly salary. One of my best friend has approached me for help as he was not getting loan from banks for starting a business. I have taken a loan of 7 lakhs for 3 years and has paid him through a account payee cheque the same day I got the loan money in my account. 

He has started the business and have form a firm with a another common friend. They agrred to pay the monthly emi of loan in the ratio of their profit sharing ratio. They have paid all the emi till today without any delay. They have mentioned this fact in their partnership deed as well that they have taken a loan from me and will share the loan in their profit sharing ratio and will withdrew any profit only after paying me the emi. They have mentioned that the liability of the loan is shared by them in their profit sharing ratio. They are doing accordingly and so far I dont have any issues.

Few days back, They have some internal conflicts and are fighting over some issues and I have seen them, Now this has made me a little worried and afraid that if they break their partnership or close the business then in what condition I would be. I have discussed the issues with the friend whom I have given the loan. He promises that in case they will break their partnership they will pay the emis till they squareoff the loan in the profit sharing ratio. He suggested me to draft a loan agreement so that i can be rest assure of the repayment.

Now I request all the distinguised lawyers over the forum to help me guide me the solutions for following :

  • Is it right to make a loan agreement?? 
  • Any specific points to mention??
  • what should be the stamp paper amount ??
  • how i can secure myself any way out??
  • Suggestions if any..
  • Should i get a promissory note signed from them??

I Know for some it may be a foolish decision but i cant reverse it as i have given them the amount so now i want to know the legal solutions to tackle the problem..

Thanks in advance.. 


Get at least three signed/stamped blank cheques without dates in your name from both and as soon as they default, secure yourself by presenting the cheques in the bank. Rest of the burden is then on them. 138 remedy works fastest.



Documentation may not necessarily save u in case of default. It will put in an endless legal battle. Take out u r money while u r on good terms with them. Do it discreetly. Bring up some gunine reason for withdrawal.


As far as documentations r concerned. Follow Lata's advice. Also securing a P Note alongwith cheques would give u recourse to Summery Suit in case of default.

So stay relaxed. Don't panic. There r many ways.

U can always use this Forum in the eventuality of default.  




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