A business promissory note is a written promise to pay a specified amount of money to a designated party at a specified time or on demand. It’s a crucial tool for businesses seeking loans or financing. Below, we present three diverse examples of business promissory notes to illustrate their use in different scenarios.
In this scenario, a small business needs to purchase new equipment but lacks the immediate funds. They decide to take a loan from a local lender. This promissory note formalizes the agreement.
Promissory Note
Date: [Date]
Borrower: [Business Name]
Lender: [Lender Name]
Loan Amount: $10,000
Interest Rate: 5% per annum
Maturity Date: [Date, e.g., 12 months from now]
For value received, the undersigned Borrower promises to pay the Lender the principal sum of Ten Thousand Dollars ($10,000), with interest at the rate of five percent (5%) per annum, payable monthly starting [first payment date]. The total amount due on the Maturity Date will be [$Total Amount, including interest].
This note may be prepaid in whole or in part without penalty.
In the event of default, the Lender may declare the entire unpaid principal and accrued interest immediately due and payable.
Notes:
In this example, two business partners decide to loan funds to their venture to cover operational costs. This note serves to formalize the loan agreement between them.
Promissory Note
Date: [Date]
Borrower: [Partner A Name & Percentage Ownership]
Lender: [Partner B Name & Percentage Ownership]
Loan Amount: $15,000
Interest Rate: 4% per annum
Maturity Date: [Date, e.g., 18 months from now]
For value received, the undersigned Borrower promises to pay the Lender the principal sum of Fifteen Thousand Dollars ($15,000), with interest at the rate of four percent (4%) per annum. The Borrower agrees to make monthly payments starting [first payment date], with the final payment due on the Maturity Date.
In the event of default, the Lender may enforce this note to recover the owed amount.
Notes:
Here, a freelancer or contractor uses a promissory note to secure immediate cash flow against unpaid invoices. This allows them to continue operations while waiting for clients to pay.
Promissory Note
Date: [Date]
Borrower: [Freelancer/Contractor Name]
Lender: [Financing Company Name]
Loan Amount: $5,000
Interest Rate: 6% per annum
Maturity Date: [Date, e.g., 30 days from now]
For value received, the undersigned Borrower promises to pay the Lender the principal sum of Five Thousand Dollars ($5,000), with interest at the rate of six percent (6%) per annum. The Borrower agrees to repay the loan in full on or before the Maturity Date.
This note is secured by [list of unpaid invoices or collateral]. In case of default, the Lender may initiate collection proceedings.
Notes:
These examples illustrate the versatility of business promissory notes in various financing situations. Each scenario emphasizes the importance of clear terms and conditions to protect both borrowers and lenders.