A large portion of all business transactions are credit transactions. One way of extending credit is by the acceptance of a promissory note, a contract in which one person (the maker) promises to pay another person (the payee) a specific sum of money at a specific time, with or without interest. A promissory note is a note payable from the standpoint of the maker; it is a note receivable from the standpoint of the payee .
Why Promissory Note Used?
A promissory note is used for the following reasons :
- The holder of a note can usually obtain money by taking the note to the bank and selling it (discounting the note).
- The note is a written agreement of a debt and is better evidence than an open account.
- The note facilitates the sale of merchandise on long-term or installment plans.
How is Promissory Note Formatted?
In general, for a note to be negotiable, it must meet the requirements of the Uniform Negotiable Instrument Law. This legislation states that the instrument:
1. The note must be in writing and signed by the maker.
2. The note must contain an order to pay a definite sum of money.
3. The note must be payable to order on demand or at a fixed future time.
Personally speaking, promissory notes format will be depend on commitment made by the maker that is agreed by the payee. For instant: if you promise to pay the payee in installment, then the promissory notes will be different compare to a promissory note that made for a single payment .
In this post, I provide 10 various promissory note templates you may copy for free. I hope you find them useful. You may want to copy and modify the template to suit your need. But, before attempting to use the template, I would recommend you to see and discuss all legal aspect of the promissory note you are going to issue with your accountant and attorney .
1. Promissory Note Basic Template
St. Petersburg, Florida
May 23, 20xx
For VALUE RECEIVED, the undersigned (jointly and severally, if more than one) promises to pay to _____________the principal sum of _________________DOLLARS, ($00,000.00) with interest from date at the rate of ______ ( ) percent per annum on the balance from time to time remaining unpaid. The said principal and interest shall be payable in lawful money of the United States of America at____________ St. Petersburg, Florida or at such place as may hereafter be designated by written notice from the holder to the maker hereof, on the date and in the manner following:
UPON DEMAND AFTER——————–.
2. Promissory Note – Installment
________________________________ [City, State, Date]
FOR VALUE RECEIVED, we the undersigned, jointly and severally, promise to pay to the order of __________________[Name of lender], _________________[City, State], the sum of ________________($__________) Dollars with interest on any unpaid balance from __________[Date] at the rate of percent per annum, and payable in equal successive monthly installments of _______________________________Dollars in lawful money of the United States of America, commencing on the _________day of each and every month thereafter until paid except the final installment which shall be the balance due on this note. If any installment be not paid when due, the undersigned promise to pay collection charges of per dollar of each overdue installment, or the actual cost of collection, whichever is greater and the entire amount owing and unpaid hereunder shall at the election of the holder hereof forthwith become due and payable, and notice of such election is hereby waived. The undersigned promises to pay all reasonable attorney’s fees incurred by the holder hereof in enforcing any right or remedy hereunder. All sums remaining unpaid on the agreed or accelerated date of the maturity of the last installment shall thereafter bear interest at the rate of __________percent per month. The undersigned authorizes the holder to date and complete this note in accordance with the terms of the loan evidenced hereby, to accept additional co-makers, to release co-makers, to change or extend dates of payment and to grant indulgences all without notice or affecting the obligations of the undersigned, and hereby waives;
a. Presentment, demand, protest, notice of dishonor and the notice of nonpayment;
b. The right, if any, to the benefit, or to direct the application of, any security hypothecated to the holder, until all indebtedness of the maker to the holder, howsoever arising shall have been paid;
c. The right to require the holder to proceed against the maker, or to pursue any other remedy in the holder’s power;
And agrees that the holder may proceed against any of the undersigned, directly and independently of the maker and that the cessation of the liability of the maker for any reason other than full payment, or any extension, forebearance, change of rate of interest, acceptance, release, substitution of security, or any impairment or suspension of the holder’s remedies or rights against the maker, shall not in anywise affect the liability of any of the undersigned hereunder. All obligations of the makers if more than one, shall be joint and several.
3. Promissory Note Installment with Acceleration Clause
______________________________[City, State, Date]
FOR VALUE RECEIVED, WE, THE UNDERSIGNED, jointly and severally promise to pay, in lawful money of the United States of America, to the order of __________[Name of Lender ] at ___________________[Address of lender], ________________[Amount] ($__________) Dollars in installments as follows:
______________[Amount of payment] on ___________[Date], and _________[Number] successive payments of ______________[Amount] beginning on ___________[Date of payment] together with a delinquency charge on each installment in default for days in an amount equal to _______percent of such installment but not less than $___________.
In the event of default in the payment of any of the said installments or said interest when due as herein provided, time being of the essence hereof, the holder of this note may, without notice or demand, declare the entire principal sum then unpaid immediately due and payable.
The holder of this note may, with or without notice to any of us, cause additional parties to be added hereto, or release any party hereto, or revise, extend, or renew the note, or extend the time for making any installment provided for herein, or accept any installment in advance, all without affecting the liability of us, or any of us, hereon.
If suit be commenced on said note, the parties hereto jointly and severally agree to pay to the holder of said note a reasonable attorney fee.
The borrower agrees to pay a reasonable collection charge should collection be referred to a collection agency or to the payee’s collection facilities.
The parties hereto, jointly and severally, hereby waive presentment, demand, protest, notice of dishonor and/or protest and notice of nonpayment; the right, if any, to the benefit of, or to direct the application of, any security hypothecated to the holder until all indebtedness of the borrower to the holder shall have been paid; the right to require the holder to proceed against the borrower, or to pursue any other remedy in the holder’s power; and agree that the holder may proceed against us directly and independently of the borrower, and that the cessation of liability of the borrower for any reason, other than full payment, or any revision, renewal, extension, forebearance, change of rate of interest, or acceptance, release or substitution of security, or any impairment or suspension of the holder’s remedies or rights against the borrower, shall not in anywise affect the liability of any of the parties hereto.
The parties hereto hereby authorize _____________________[Payee] to date this note as of the day when the loan evidenced hereby is made and to complete this note in any other particular according to the terms of the said loan.
It is agreed that if the parties hereto, or any of them at any time fail in business or become insolvent, or commit an act of bankruptcy, or if any deposit account or other property of the parties hereto, or any of them, be attempted to be obtained or held by writ of execution, garnishment, attachment, or other legal process, or if any assessment for taxes against the parties hereto, or any of them, other than taxes on real property, is made by the federal or state government, or any department thereof, or if the parties hereto fail to notify you of any material change in their financial condition, then, and in such case all of the obligations of the parties hereto to you, or held by
you, shall at your option immediately become due and payable without demand or notice.
4. Promissory Note Secured By Deed Of Trust (Straight Note)
$_____________ _______________________[City and State] _______[Date]
_________________________________________________after date for value received I promise to pay to __________________________________________or order, at _______________________________________ payable_________________ or sooner, secured by Assignment of Deed of Trust on the following described land:
_____________________________________________________________________ [Legal Description]
Should default be made in payment of principal or interest, the whole sum of principal and interest shall, at the option of the holder of this note, become immediately due. Principal and interest payable in lawful money of the United States. If action is instituted on this note, the undersigned promises to pay such sum as the Court may adjudge as attorney’s fees. This note is secured by a Deed of Trust to __________________
5. Promissory Note-[Long Form]
FOR VALUE RECEIVED, the undersigned hereby jointly and severally promise to pay to the order of ______________________[Name], the sum of ____________[$Amount] Dollars, together with interest thereon at the rate of _______%[Number] per annum on the unpaid balance. Said sum shall be paid in the manner following:
_____________________________________________________________________ [Describe terms]
All payments shall be first applied to interest and the balance to principal. This note may be prepaid, at any time, in whole or part, without penalty. This note shall at the option of any holder hereof be immediately due and payable upon the occurrence of any of the following:
1. Failure to make any payment due hereunder within _____[Number] days of its due date.
2. Breach of any condition of any security interest, mortgage, pledge agreement or guaranty granted as collateral security for this note.
3. Breach of any condition of any security agreement or mortgage, if any, having a priority over any security agreement or mortgage on collateral granted, in whole or in part, as collateral security for this note.
4. Upon the death, dissolution or liquidation of any of the undersigned, or any endorser, guarantor or surety hereto.
5. Upon the filing by any of the undersigned of an assignment for the benefit of creditors, bankruptcy, or for relief under any provisions of the Bankruptcy Code; or by suffering an involuntary petition in bankruptcy or receivership not vacated within thirty days.
In the event this note shall be in default, and placed with an attorney for collection, then the undersigned agree to pay all reasonable attorney fees and costs of collection. Payments not made within five days of due date shall be subject to a late charge of _______ [Number]% of said payment. All payments hereunder shall be made to such address as may from time to time be designated by any holder hereof.
The undersigned and all other parties to this note, whether as endorsers, guarantors or sureties, agree to remain fully bound hereunder until this note shall be fully paid and waive demand, presentment and protest and all notices thereto and further agree to remain bound, notwithstanding any extension, modification, waiver, or other indulgence by any holder or upon the discharge or release of any obligor hereunder or to this note, or upon the exchange, substitution, or release of any collateral granted as security for this note. No modification or indulgence by any holder hereof shall be binding unless in writing; and any indulgence on any one occasion. Any modification or change of terms, hereunder granted by any holder hereof, shall be valid and binding upon each of the undersigned, notwithstanding the acknowledgement of any of the undersigned, and each of the undersigned does hereby irrevocably grant to each others a power of attorney to enter into any such modification on their behalf. The rights of any holder hereof shall be cumulative and not necessarily successive. This note shall take effect as a sealed instrument and shall be construed, governed and enforced in accordance with the laws of __________________________________________.
6. Promissory Note – [In Lieu Of Open Account Debt]
FOR VALUE RECEIVED, the undersigned promise to pay to the order of __________________[Name], the sum of _____________[$Amount] Dollars, together with interest thereon at the rate of _______[Number]% per annum on the unpaid balance.
Said principal and interest shall be payable in the manner following: __________________________________________________
_____________________________________________________________________ [Describe terms]
The undersigned may prepay this note without penalty. In the event any payment due hereunder is not paid when due, the entire balance shall be immediately due upon demand of any holder. Upon default, the undersigned shall pay all reasonable attorney fees and costs necessary for the collection of this note.
This note is executed to evidence a certain existing indebtedness due the payee from the undersigned relative to a certain open account balance as of this date, and this note shall not be construed as a separate obligation.
Signed under seal this __________[Date].
7. Promissory Note [Demand]
FOR VALUE RECEIVED, the undersigned jointly and severally promise to pay to the order of _______________________[Name], the sum of _____________[$Amount] Dollars, together with interest of _________[Number]% per annum on the unpaid balance. The entire unpaid principal and any accrued interest shall be immediately payable UPON DEMAND of any holder of this note.
Upon default in making payment within _______[Number] days of demand, the undersigned agree to pay all reasonable legal fees and costs of collection to the extent permitted by state law. This note shall take effect as a sealed instrument and be enforced in accordance with the laws of the payee’s state.
8. Promissory Note [Installment Note – Short Form]
FOR VALUE RECEIVED, the undersigned jointly and severally promise to pay to the order of ________________________, the sum of _________________[$__________] Dollars, together with interest thereon at the rate of ________% per annum on any unpaid balance.
Said sum, inclusive of interest, shall be paid in _____________ [Monthly/Weekly] installments of $____________ each, with a first payment due __________, 19___, and a like amount on the same day of each ______________[Month/Week] thereafter until the full amount of this note and accrued interest shall be fully paid. All payments shall be first applied to accrued interest and the balance to principal. The undersigned reserves the right to pre-pay this note in whole or in part without penalty.
This note shall be fully payable upon demand of any holder in the event the undersigned shall default in making any payments due under this note within ____ days of its due date.
In the event of any default, the undersigned agreed to pay all reasonable attorney fees and costs of collection to the extent permitted by law. This note shall take effect as a sealed instrument and be enforced in accordance with the laws of the payee’s state.
9. Promissory Note and Disclosure Statement [Federal Truth in Lending Act]
FOR VALUE RECEIVED, the undersigned jointly and severally promise to pay to the order of _____________________[Name], the sum of ___________________[Name] Dollars in __________[Number] consecutive, monthly payments of ___________[$Amount] each, beginning one month from date hereof and thereafter on the same date of each subsequent month until paid in full. Any unpaid balance may be paid at any time without penalty and any unearned finance charges will be refunded based on the Rule of 78″s. In the event the undersigned defaults in any payment beyond _____ [Number] days from the due date, the entire balance may be due at the option of the holder.
3. Amount financed [1+2] _______________[$Amount]
4. Total of payments _______________[$Amount]
5. Annual Percentage Rate _________ [Number]%
10. Promissory Note with Guarantee
FOR VALUE RECEIVED, the undersigned jointly and severally promise to pay to the order of _________________[Name], the sum of _____________[$Amount] Dollars, with interest thereon at the rate of ________[Number]% per annum on the unpaid balance.
Said sum shall be payable in the manner following:
The undersigned shall have the right to prepay without penalty. In the event any payment due hereunder is not made when due, the entire balance shall be immediately due at the option of any holder.
In the event of default, the undersigned agree to pay all reasonable attorney fees and cost of collection.
Each maker, surety, guarantor or endorser of this note waives presentation of payment, notice of non-payment, protest and notice of protest and agrees to all extensions, renewals, or release, discharge or exchange of any other party or collateral without notice.