Business Promissory Note Format: Tips and Examples

Introduction:

Business promissory note, also known as commercial or trade promissory note, is a written promise to pay a certain amount of money to the bearer or a specified person in a certain manner and time. It is a common instrument used by businesses to borrow money from individuals or other businesses. In this article, we will discuss the format of a typical business promissory note, as well as some tips and examples to help you create a professional and effective note.

The Format of a Business Promissory Note:

A typical business promissory note consists of several essential elements, including:

1. Title: \"Business Promissory Note\" or \"Commercial Promissory Note\" at the top of the document.

2. Amount: The amount of money borrowed, in both numeric and written forms.

3. Interest: The interest rate charged for the loan, if any.

4. Maturity date: The date when the loan is due to be repaid.

5. Payments: The amount and frequency of payments to be made (i.e. monthly, quarterly, annually, etc.), as well as the method of payment (i.e. check, wire transfer, direct debit, etc.).

6. Collateral: Any collateral that secures the loan (i.e. property, inventory, accounts receivable, etc.).

7. Signature: The signature of the borrower, together with the date and location of signing.

8. Witnesses: The signatures of two witnesses who have witnessed the borrower's signature.

9. Governing law: The state or country whose laws govern the promissory note.

The above elements should be presented clearly and concisely, in a font size that is large enough to be easily read. The promissory note should also include any special conditions or terms that apply to the loan, such as prepayment penalties or late fees.

Tips for Creating a Professional and Effective Business Promissory Note:

1. Use a template: There are many online templates available that you can use to create a professional-looking promissory note. These templates include all the essential elements and are easy to customize to your needs.

2. Be clear and concise: Your promissory note should be easy to read and understand. Use simple, straightforward language, and avoid complex legal terms or jargon.

3. Specify the consequences of default: Be clear about what will happen if the borrower fails to repay the loan, such as legal action or seizure of collateral.

4. Consult an attorney: If you are unsure about any aspect of the promissory note, it is recommended that you consult an attorney to ensure that you are complying with all relevant laws and regulations.

Examples:

Example 1:

Business Promissory Note

Amount: $10,000

Interest: 6% per annum

Maturity date: 30th June 2022

Payments: $1,000 per month by the last day of each month, by check or wire transfer to the lender's bank account.

Collateral: All inventory and accounts receivable of the borrower.

Signature: ________________

Date: _________________

Location: ______________

Witness 1: ______________

Witness 2: ______________

Governing law: The laws of the State of California.

Example 2:

Commercial Promissory Note

Amount: $50,000

Interest: 8% compounded annually

Maturity date: 1st January 2023

Payments: The entire amount owed, together with all accrued interest, to be paid on the maturity date by wire transfer to the lender's bank account.

Collateral: A lien on all real estate and buildings owned by the borrower.

Signature: ________________

Date: _________________

Location: ______________

Witness 1: ______________

Witness 2: ______________

Governing law: The laws of the State of New York.

In conclusion, a well-crafted business promissory note is a critical tool for businesses that need to borrow money. By following the above format and tips, you can create an effective and professional promissory note that protects your interests and meets all relevant legal requirements.