Real-world examples of business promissory notes (with templates)

Example of a simple small‑business promissory note (short‑term loan)

Let’s start with one of the most common examples of business promissory notes: a short‑term loan from an individual lender to a small LLC.

Scenario: A consultant’s LLC borrows $50,000 from a private investor to cover cash flow while waiting on a big corporate contract to pay.

Key terms in this example:

• Principal: $50,000
• Interest: 9% per year, simple interest
• Term: 12 months
• Payments: Monthly interest‑only, with a balloon payment of principal at maturity
• Security: Unsecured (no collateral)

How it might read in plain language:

Borrower promises to pay Lender the principal sum of Fifty Thousand Dollars ($50,000), together with interest at the rate of nine percent (9.00%) per annum, calculated on the basis of a 365‑day year. Borrower shall make monthly interest‑only payments on the first day of each month, beginning March 1, 2025. The entire unpaid principal, plus any accrued but unpaid interest, shall be due and payable in full on February 1, 2026.

This is one of the best examples of a straightforward business note: no collateral, clear interest, clear due date, and a simple payment structure.

Secured equipment financing: examples of business promissory notes with collateral

Another classic example of a business promissory note is equipment financing. Here, the lender wants collateral.

Scenario: A small manufacturing company borrows $120,000 from a bank to buy a new CNC machine.

Typical terms:

• Principal: $120,000
• Interest: 7.25% fixed
• Term: 5 years
• Payments: Equal monthly installments of principal and interest
• Security: The CNC machine itself, plus a Uniform Commercial Code (UCC‑1) filing on equipment

Sample language you’ll see in real examples of business promissory notes:

This Note is secured by a first‑priority security interest in that certain Haas CNC Vertical Machining Center, Model VF‑4, Serial No. [number], together with all attachments, substitutions, and proceeds thereof. Borrower shall not sell, transfer, or encumber the Collateral without Lender’s prior written consent.

Banks in the United States typically document this with a note plus a separate security agreement and a UCC‑1 financing statement filed under Article 9 of the Uniform Commercial Code. For background on secured transactions, the Cornell Legal Information Institute provides a solid overview.

Founder‑to‑company loans: examples include startup bridge notes

In startup land, founders often loan money to their own companies. Those internal loans still need a promissory note.

Scenario: A founder loans $25,000 to her Delaware C‑corp startup to cover payroll before a seed round closes.

Common terms:

• Principal: $25,000
• Interest: 5% per year
• Term: 18 months, or earlier upon equity financing
• Payments: No monthly payments; all due at maturity or when the company raises at least $1M in priced equity
• Subordination: Founder’s loan is junior to bank debt

Example language:

The outstanding principal and accrued interest under this Note shall be due and payable on the earlier of (a) August 1, 2026 or (b) the closing of an equity financing in which the Company raises at least One Million Dollars ($1,000,000) in gross proceeds.

Payment of this Note is expressly subordinated to all obligations of the Company to its senior secured lender, whether now existing or hereafter incurred.

These kinds of internal loans are great real examples of business promissory notes where the lender is deeply aligned with the company but still wants documentation for tax and ownership records.

Intercompany loan: example of a promissory note between related entities

Larger groups often move money between related entities: a parent company funding a subsidiary, or one subsidiary funding another. Tax authorities care a lot about how these are documented.

Scenario: ParentCo, a U.S. corporation, loans $500,000 to its wholly owned subsidiary, SubsidiaryCo, to open a new regional office.

Typical features:

• Principal: $500,000
• Interest: An arm’s‑length rate based on market data (for example, 6.5%)
• Term: 3–5 years
• Payments: Quarterly interest, principal amortized over the final two years
• Governing law: Often the state where ParentCo is incorporated

Why this matters: The IRS expects related‑party loans to be documented and priced like real loans, not disguised equity. The IRS’s guidance on arm’s‑length interest rates for related‑party transactions is a good reference when you’re modeling these examples of business promissory notes.

Example clause:

The parties acknowledge that the interest rate under this Note is intended to approximate an arm’s‑length rate available to Borrower from an unrelated third‑party lender with similar creditworthiness and collateral, within the meaning of Section 482 of the Internal Revenue Code.

Vendor financing: examples of customers paying over time

Sometimes your “lender” is actually your supplier.

Scenario: A restaurant buys $80,000 of kitchen equipment from a supplier, which agrees to finance 70% of the purchase price.

Key terms:

• Principal: \(56,000 (70% of \)80,000)
• Interest: 8% per year
• Term: 36 months
• Payments: Fixed monthly payments drafted via ACH
• Security: Supplier retains a security interest in the equipment and may repossess on default

This example of a business promissory note often sits alongside a purchase agreement. The note might say:

This Note evidences a portion of the purchase price for the equipment described in that certain Equipment Sales Agreement dated April 3, 2025 between Borrower and Lender. In the event of default, Lender may exercise all rights and remedies of a secured party under Article 9 of the Uniform Commercial Code, including repossession of the equipment.

Vendor financing is one of the best examples of how promissory notes support sales growth: the supplier closes more deals, and the buyer preserves cash.

Line of credit example: revolving business promissory note

Not all notes are one‑and‑done. Some support a revolving line of credit.

Scenario: A bank extends a $250,000 revolving line of credit to a marketing agency to manage seasonal cash flow.

Common structure:

• Maximum principal: Up to $250,000 outstanding at any time
• Interest: Variable, for example, Prime + 2.5%
• Term: 2‑year commitment, with annual review
• Payments: Monthly interest on the outstanding balance; principal due at maturity but can be paid down anytime
• Covenants: Borrower must maintain certain financial ratios

Example language in these real examples of business promissory notes:

This is a revolving promissory note. Borrower may borrow, repay, and re‑borrow hereunder from the date of this Note until the Maturity Date, provided that the total principal amount outstanding at any time shall not exceed Two Hundred Fifty Thousand Dollars ($250,000).

The note is usually paired with a business loan agreement that spells out covenants and reporting requirements. The Federal Reserve’s Survey of Terms of Business Lending is useful if you’re trying to benchmark interest rates for this kind of credit in 2024–2025.

Convertible promissory note: example of debt that can become equity

Startup investors often use convertible notes, which start as debt but may convert into equity later.

Scenario: An angel investor lends $150,000 to a tech startup via a convertible promissory note.

Typical terms:

• Principal: $150,000
• Interest: 5–7% per year (often simple interest)
• Term: 18–24 months
• Conversion: Principal plus interest converts into preferred stock at a discount (for example, 20%) to the price paid by new investors
• Valuation cap: Optional, to cap the conversion price

Sample conversion clause:

Upon the closing of a Qualified Financing, the outstanding principal and accrued interest under this Note shall automatically convert into the same series of equity securities issued to investors in such Qualified Financing at a conversion price equal to eighty percent (80%) of the price per share paid by such investors.

Convertible notes are some of the most widely referenced examples of business promissory notes in startup law blogs because they blur the line between debt and equity but are documented on a familiar promissory note framework.

Real examples of default, late fees, and acceleration

All of the examples of business promissory notes above share one thing: they need teeth if the borrower stops paying.

Common default triggers:

• Failure to pay principal or interest when due
• Bankruptcy or insolvency
• Breach of covenants (for example, not maintaining insurance on collateral)

In practice, you’ll often see language like:

If Borrower fails to pay any amount due under this Note within ten (10) days after its due date, Borrower shall pay a late fee equal to five percent (5%) of the overdue amount.

Upon the occurrence of an Event of Default, at the option of Lender and without notice, the entire unpaid principal balance, together with all accrued interest and other sums due hereunder, shall become immediately due and payable.

These real examples show why you can’t just write “we’ll pay you back eventually.” The acceleration clause is what lets a lender call the entire loan if things go sideways.

For general contract‑law background on enforcement, the Legal Information Institute’s contracts overview is a good neutral reference.

How 2024–2025 trends show up in examples of business promissory notes

If you compare older templates to current examples of examples of business promissory notes, a few trends stand out:

• More variable‑rate language. With interest rates rising and then fluctuating after 2022, many banks now tie rates to benchmarks like the Wall Street Journal Prime Rate or SOFR. That means more clauses about rate resets and notice.
• Tighter covenants for small businesses. Lenders are watching cash flow more closely. Examples include minimum debt‑service‑coverage ratios and regular delivery of financial statements.
• Electronic signatures and e‑delivery. Modern notes routinely authorize e‑signatures and electronic delivery of notices, aligning with U.S. ESIGN and UETA statutes.
• Stronger cross‑default language. If you default on one loan with a bank, that default may trigger acceleration on other notes with the same lender.

When you review or draft any example of a business promissory note in 2025, expect the lender’s lawyer to build in protections that reflect this higher‑rate, higher‑scrutiny environment.

Practical drafting tips drawn from the best examples

Pulling together all these real examples of business promissory notes, a few practical patterns emerge:

• Spell out the payment schedule. Don’t just say “monthly.” Specify dates, amounts (or a formula), and where payments are made.
• Define your interest calculation. State whether it’s simple or compound, 360‑day or 365‑day year, and how variable rates adjust.
• Be explicit about collateral. Describe the collateral clearly and reference any separate security agreements or filings.
• Include governing law and venue. Most examples include a clause choosing the state law that applies and where disputes will be handled.
• Think about early payment. Clarify whether the borrower can prepay without penalty, and how prepayments are applied (interest first, then principal).

If you’re in the U.S. and want to see statutory language that often influences note drafting, many state court systems and bar associations publish sample forms. For instance, several state judiciary websites host basic civil forms and contract‑related resources on their .gov domains.

FAQ: examples‑focused questions about business promissory notes

What are common real‑world examples of business promissory notes?
Common examples include small‑business term loans, equipment financing notes, vendor financing notes tied to a purchase, founder‑to‑company bridge loans, intercompany loans within a corporate group, revolving line‑of‑credit notes, and convertible notes used in startup financings.

Can I use one example of a promissory note for every type of business loan?
You can start from a general template, but the best examples are customized. A secured equipment loan needs collateral and insurance clauses. A convertible note needs conversion mechanics. A founder loan might need subordination language. Copy‑and‑paste templates without tailoring are a fast way to create disputes later.

Are there examples of business promissory notes that don’t charge interest?
Yes, especially for short‑term loans between related parties, like a parent lending to a very young startup. That said, tax rules in the U.S. may impute interest if the rate is artificially low, so even interest‑free examples should be vetted with tax counsel or an accountant.

Where can I find authoritative example of contract language for promissory notes?
Law school sites and legal information portals are helpful. The Cornell Law School Legal Information Institute is widely used, and some U.S. state court systems publish sample forms on their official .gov websites. These aren’t tailored to your deal, but they’re reliable starting points.

Do electronic signatures work for business promissory notes?
In the U.S., yes, in most cases. The federal ESIGN Act and state‑level UETA laws generally recognize e‑signatures for contracts like promissory notes, as long as certain conditions are met. Many 2024–2025 examples of business promissory notes include language explicitly authorizing electronic signatures and electronic delivery of notices.

Used thoughtfully, these examples of examples of business promissory notes are not just templates to copy—they’re checklists of issues to address: who owes what, when, at what price, backed by which collateral, and what happens if things go wrong. That’s the real job of a promissory note in modern business finance.