Having an attorney handle a complex legal matter is necessary, but it is also costly and time consuming. There are actually some legal transactions, such as non-complex loans or purchases where money is repaid over time, that can be handled without an attorney. A fillable, printable promissory note is a useful business instrument that may be used as a tool for simple lending transactions.
Using the Printable Promissory Note
A promissory note (sometimes referred to as a p-note) is a legal document or instrument that contains a written promise by an individual or legal entity (the 'Maker' or 'Borrower') to pay a specified amount of money (the 'Principal') to another individual or entity (the 'Payee' or 'Lender') in accordance with the various terms and conditions contained within the promissory note. The terms and conditions can vary greatly depending upon the business structure of the transaction.
The printable promissory note provided here is a good guide to use for a non-complex lending transaction. This promissory note is easy to edit to meet your specific needs. To use the form, click on the image below to open the printable PDF template in a separate window where you can fill in the fillable fields. Remember to save the document to your hard drive. If you have issues working in the template file, please see this guide for using printable Adobe forms.
Please note: This article is informative only, and should not be construed as legal advice. Always consult with a licensed attorney before entering into any legal transaction or preparing any legal instrument.
Navigating the Printable P-Note
There is quite a bit of information that you will need to fill-in on the promissory note before you use it. Be sure you understand each section thoroughly, as the document will become legally binding when executed.
Summary Statement of Payment Terms
In the first section of the printable promissory note, fill in the information that summarizes the payment terms of the transaction. If there is no interest being paid, place 0% in the interest rate space. If the payments are over a time period other than monthly, change that provision to another time frame such as 'weekly,' 'bi-monthly' or 'quarterly.'
Parties and Promise to Pay
In this next section, fill in the names of the parties, the amount to be repaid pursuant to the promissory note, the interest rate (if any) and the address where the payments will be made.
If either of the parties is a legal entity (corporation, limited liability company, partnership, etc.), as opposed to an individual, check the official organizational records of the legal entity with the Secretary of State in the state of the entity's formation. That information will tell you who is authorized to sign the promissory note, or receive the promissory note, on behalf of the legal entity.
Terms of Payment, Security Agreement, and Penalties
In the next section, repeat the information that you filled in in the summary information regarding the payment amount, first payment date and maturity date.
Next, if there is a security instrument of some type (usually a mortgage pledging real property, or a security agreement pledging other property) fill that information where indicated. If there is no security for the promissory note, just write in the N/A symbol to indicate that this section is not applicable.
Finally, it is customary in business to have a short grace period for the payment of the regular payments on the promissory note. Decide what would be a fair time period (5 days is very standard), and a fair late fee (a fixed cost of $25 - $40 or a percentage of the amount due at around 5% is common).
Standard Terms and Conditions
In the next section, the only information that needs to be filled in is the name of the state where the promissory note was executed and delivered, and the name of the state whose laws will govern the interpretation and enforcement of the promissory note. There is no requirement that the states be the same. The other provisions in this section are standard terms and conditions of a promissory note and should generally be included.
Signatures, Witnesses and Notary
All promissory notes need to be signed by the Maker/Borrower to be valid. There is no requirement in most states that the promissory note be witnessed or notarized. To be on the safe side, always check with an attorney to understand the specific requirements of the state where the promissory note is executed and delivered.
In all states, an otherwise legally sufficient promissory note that is signed by the Maker/ Borrower, witnessed by two adult witnesses, and notarized by a properly commissioned notary public in that state is valid and enforceable.
Cancelling and Surrendering the Promissory Note
Once the principal and interest (if any) amounts due under the promissory note have been paid, the promissory note should be marked "PAID IN FULL AND CANCELLED" and then surrendered to the Maker or Borrower who signed the promissory note.
Examples of Various Terms and Conditions
Of course, not all promissory notes have the same terms and conditions. Examples include:
- The promissory note may provide that the Maker or Borrower may pay interest on the unpaid principal due under the promissory note. There are limitations in each state as to the amount of interest that may be charged. Demanding and collecting a rate of interest in excess of the amounts allowed by the governing law is called 'usury' and can result in civil and criminal sanctions.
- The promissory note may contain specific time periods when payments of principal and interest must be paid, and remedies and penalties if payments are not made according to that schedule. Usually, promissory notes require regular monthly payments, but time periods for payment are completely up to the parties to the promissory note.
- The promissory note may contain language indicating that the promise to pay is secured by some sort of collateral that is pledged to the Payee or Lender. Examples of security instruments would be mortgages that pledge real property or security agreements that pledge other types of property or interests as security.
There are many other terms and conditions which may be included by the parties to the promissory note, including balloon payments at the end of the term of the promissory note, provisions for attorney's fees and costs upon default on the promissory note, acceleration clauses, etc. Always consult an attorney to discuss the specific business terms and conditions that should be included in a promissory note based upon your unique situation.
Starting Point for Simple Loan Transactions
Although consultation with an attorney is always best, this form of promissory note will give you a good start on properly documenting any business transactions that involve a loan of money. It is vital that both parties to the transaction have a clear understanding of the terms and conditions of the transaction. By drafting a promissory note, both parties can have confidence that the transaction terms are correct and acceptable to each party.