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 following are the key terms of promissory notes:
- The amount of the loan
- The amount of the interest rate
- When interest and principal are payable
- Where payments are to be sent
- The late fee if payment is not made on time
- Whether the note is secured by any assets of the borrower
- Whether the note is guaranteed by another person or entity
- 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
- That the borrower is liable for attorneys’ fees and costs if you have to sue to recover under the note
- What law governs and where legal actions can be started if the borrower defaults
A sample promissory note payable on a designated date can give you an idea of what to include. This promissory note is drafted to be protective of the lender.