Buyer & Seller Information

What is Included in a Promissory Note?

A Promissory Note is an unconditional written promise to pay a specified sum of money on demand or at a specified date. It is used to record a loan and may be used in lending transactions ranging from $1,000 to $15,000.

Unless the lender is a bank with its own form of loan agreement, a good Promissory Note is often sufficient to evidence a loan or borrowing. Promissory Notes do not have to be notarized to be legally valid in most states.

Promissory Notes usually contain the following key points:

  • The date of the note
  • The borrower’s name
  • The lender’s name
  • The address where payments are to be sent
  • The amount of the debt
  • Whether the note is payable on demand or at a definite time
  • Description of the collateral
  • The interest rate
  • The due dates for payment of interest and principal
  • Whether the note can be prepaid
  • Any late charges
  • An attorneys’ fees clause
  • The borrower’s proper signature

If your company will be loaning money to a third party, you may be wondering what you should include in the promissory note.
A promissory note is intended to be a legal contract obligating the borrower to pay back a loan. The key terms of promissory notes are:

  1. The amount of the loan
  2. The amount of the interest rate
  3. When interest and principal are payable
  4. Where payments are to be sent
  5. The late fee if payment is not made on time
  6. Whether the note is secured by any assets of the borrower
  7. Whether the note is guaranteed by another person or entity
  8. That the maturity date of the loan can be accelerated if the borrower has not made timely payments or otherwise breached the terms of the note
  9. That the borrower is liable for attorneys’ fees and costs if you have to sue to recover under the note
  10. What law governs and where legal actions can be started if the borrower defaults