Docstoc

Promissory Note - Guide and Sample

Document Sample
Promissory Note - Guide and Sample Powered By Docstoc
					This is a guide that provides information about promissory notes as well as including a
sample promissory note agreement. The guide sets forth general information about
promissory notes, provides a checklist, and includes step-by-step instructions. Under
the sample promissory note, the borrower provides additional security for the repayment
of the loan by providing the lender with a security interest in certain assets. Additionally,
the note becomes immediately due at the election of the lender. This document should
be used by individuals or entities that want to learn more about promissory notes or
want to enter into a loan agreement using certain assets as security for the repayment
of the loan.
Table of Contents


General Information ........................................................................................................................ 3

Checklist ......................................................................................................................................... 4

Step-by-Step Instructions ................................................................................................................ 4

Disclaimer ....................................................................................Error! Bookmark not defined.8




© Copyright 2011 Docstoc Inc.                                                                                                          2
                                      General Information

       Any time you loan or borrow money, it is always best to use a Promissory Note.
Documenting the loan will not only ensure that the parties are clear on the transaction, but will
avoid any misunderstandings later. A Promissory Note is a fairly straightforward document that
sets forth repayment terms when you borrow money.


       This note is a secured Promissory Note. In a secured note, the borrower has pledged an
asset as collateral for the loan. This is preferable for the Lender, because if the borrower ever
becomes insolvent or files for bankruptcy, the Lender will have claim to the asset that has been
pledged.


       In the form you will need to determine the interest rate of the loan. There are two types
of interest rates, either fixed or variable. A fixed interest rate remains the same during the life
the loan and does not change. A variable interest rate is tied to the market and will go up and
down based on what is happening in the marketplace.


       There are various ways to repay a loan, installment payments, lump sum, balloon
payments, interest only or a combination of these. Installment payments are the most common,
where the borrower will pay a set sum every month and a portion will go to principal and a
portion to interest. A lump sum payment would be paying down the balance in full at the end of
the loan period. This is similar to a balloon payment, where a borrower might make payments
for a time, and then a large payment will be due. Interest only is where they borrower pays the
interest every month, but makes no payment towards the principal.




© Copyright 2011 Docstoc Inc.                                                             3
                                             Checklist



      Borrower and Lender should review the document thoroughly and make sure they
       understand the terms.


      The parties should note that this is a secured note, which means the borrower has pledged
       an asset as security for the loan. As such, an additional document needs to be attached
       stating which asset will act as security.


      Both parties should sign the agreement and retain a copy.
      Laws vary given what state you are doing business in, so parties should familiarize
       themselves with the laws of their state.




                                    Step-by-Step Instructions




© Copyright 2011 Docstoc Inc.                                                          4
These instructions highlight where the user needs to fill in information, as well as point out any
areas that should be paid close attention to.

At the very top portion of the form, enter the full amount of the loan, the interest rate and the
date.


Value Received: Enter the name of the borrower, the name of the lender, and the full amount of
the loan. Enter the applicable interest rate.


The Promissory Note. This is a secured note. This paragraph refers to the security that has been
put up as collateral for the loan. Attach additional documentation, as referred to in this section,
which gives more details regarding the asset being pledged.


The Promissory Note: Under this section enter the name of the state that this note is being
entered into.


In the Event of: In the event of default under any provision of this note, the entire note shall
become due and payable in full. This is a standard provision for Promissory Notes.


Signature Block: Sign and date the document. Each party should retain a copy for their
records.




© Copyright 2011 Docstoc Inc.                                                               5
                      PROMISSORY NOTE – GENERAL – SECURED

AMOUNT: $_______________                                             DATE: ________________
INTEREST RATE: _________                                             DUE: On Demand


        FOR VALUE RECEIVED, the undersigned ______________, hereby promises to pay to
the order of _____________________ (the “Lender”) at _____________________________
(address) the principal sum ________________ ($___________) Dollars payable on demand,
with interest thereon at the rate of __________ percent (_____%) annually.

        THIS PROMISSORY NOTE is secured by a Security Agreement executed by the parties
hereto on _______________ [enter date] whereby the undersigned has pledged its/his/her
interests in certain assets and undertaken certain additional obligations, as are more fully set
forth therein, attached hereto as Schedule A.

        NO COURSE OF DEALING between the undersigned and the Lender or any delay on
the part of the Lender in exercising any rights hereunder shall operate as a waiver of any rights of
the Lender. All of the covenants, stipulations, promises and agreements contained in this
promissory note made by or on behalf of the undersigned shall bind his heirs, executors,
administrators successors and assigns, whether so expressed or not.

        THE UNDERSIGNED MAY, at any time, without notice, bonus or penalty, prepay or
cause to be prepaid the whole or any part of the principal amount remaining unpaid hereunder.

       THIS PROMISSORY NOTE shall be governed by the laws of the State of
________________, which laws shall be applicable to the interpretation, construction and
enforcement hereof.




© Copyright 2011 Docstoc Inc.                                                              6
         IN THE EVENT OF payment of interest or any other amounts secured by this
Promissory Note or upon the bankruptcy or insolvency of the undersigned, or upon the filing of a
petition in bankruptcy against the undersigned, or upon the making of a proposal in bankruptcy
by the undersigned, the whole of the monies (or any part thereof) secured by this Promissory
Note remaining unpaid shall, at the option of the Lender, forthwith become due and payable and
all the powers in and by the Promissory Note or by law conferred in case of default shall become
exercisable.

         THE UNDERSIGNED may, at any time, without notice, bonus or penalty, prepay or
cause to be prepaid the whole or any part of the principal amount remaining unpaid hereunder.

        DATED this _____ day of ____________________, _______.



                                Debtor

                                                   (COMPANY)
                                                   Per:



                                                   .




© Copyright 2011 Docstoc Inc.                                                          7
                                         SCHEDULE A
         [use “Schedule A” page as a separate sheet, and then attach the asset agreement
                                        behind it.]




© Copyright 2011 Docstoc Inc.                                                     8

				
DOCUMENT INFO
Description: This is a guide that provides information about promissory notes as well as including a sample promissory note agreement. The guide sets forth general information about promissory notes, provides a checklist, and includes step-by-step instructions. Under the sample promissory note, the borrower provides additional security for the repayment of the loan by providing the lender with a security interest in certain assets. Additionally, the note becomes immediately due at the election of the lender. This document should be used by individuals or entities that want to learn more about promissory notes or want to enter into a loan agreement using certain assets as security for the repayment of the loan.
Customize This Document Instantly download your personalized document Guided Fill-in-the-Blank Process
This document is also part of a package Commercial Real Estate Starter Kit 9 Documents Included