1 (888) 462-3453
Contract Template Library - Free Contract Template Download

Promissory Note Template

A promissory note is used by small business owners when paying back loans. Learn more details and get a template.

Business Credit and Loans
Free
Business Operations
 

If you're a small business owner, it's important to know about promissory notes. A promissory note can be used to secure a loan from a bank or other lending institution, or it can be used between private individuals to formalize an agreement for borrowing money. If you're thinking about taking out a loan, learn more details about what a promissory note is and how a promissory note template can help you.

What Is a Promissory Note?

A promissory note is a legal document that contains a written promise to pay a certain amount of money to a specific person or entity. The promissory note template will also include the date when the debt is due, as well as the name and address of the person or entity that is owed the money.

In some cases, the promissory note may also contain collateral — meaning the borrower has pledged something of value (such as a car or a piece of property) as security for the loan. If the borrower defaults on the loan, the lender has the right to seize the collateral. Promissory notes are commonly used in business transactions, but they can also be used for personal loans between family and friends.

 

What Should Be Included in a Promissory Note Template?

A promissory note is a legal document that outlines the terms of a loan. The note should include the names of the lender and borrower, the amount of money being borrowed, the interest rate and the repayment schedule.

The repayment schedule should specify when and how the borrower will make payments to the lender. In some cases, the promissory note may also include collateral, which is something of value that the borrower agrees to put up as security for the loan. If the borrower defaults on the loan, the collateral can be seized by the lender in order to recoup their losses. For these reasons, it is important to carefully read and understand a promissory note before signing it.

 

Different Types of Promissory Notes

There are three main types of promissory notes: simple promissory notes, secured promissory notes and Instruments.

Simple promissory notes are the most basic type of note. They typically do not require collateral and have a relatively short repayment period. However, because they are unsecured, they often have higher interest rates than other types of promissory notes.

Secured promissory notes are backed by collateral, such as a car or piece of property. This collateral gives the lender a greater level of security in case the borrower defaults on the loan. As a result, secured promissory notes typically have lower interest rates than unsecured notes.

Instruments are a type of promissory note that is typically used for larger debts, such as mortgages and business loans. Instruments typically have longer repayment periods than other types of notes and often offer lower interest rates.

 

Promissory Note FAQs

1
Who Can Issue a Promissory Note?

A promissory note can be issued by an individual, corporation or other entity. In most cases, the borrower will issue the promissory note to the lender.

2
How Is a Promissory Note Used?

A promissory note is typically used when one party loans money to another party. The document serves as evidence of the loan and outlines the terms of repayment. Promissory notes can be used for both secured and unsecured loans.

3
What Are the Consequences of Not Paying a Promissory Note?

If you fail to repay a promissory note according to the terms outlined in the document, you may be subject to legal action from the lender. In some cases, you may also be required to pay late fees or additional interest. If you are unable to repay the loan, the lender may seize any collateral that was used to secure the loan.

 

Get a Promissory Note Template

A promissory note is a legal document that outlines the terms of a loan. It's important to include all pertinent information in your promissory note so both the lender and the borrower understand the agreement. If you're looking for a simple way to draft your own promissory letter, our team has created a promissory note template for you to download.

Incfile Can Help You Do It All

From LLC formation and Registered Agents to compliance and startup services, we have you covered.