Loan Promissory Notes | Entrepreneurial Law | Tressler & Associates
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loan promissory notes

Loan Promissory Notes

Trying to get the funds you need to get your business off the ground can be a huge struggle, but you need this to turn your ideas into a successful business. There are many different ways to get access to the capital your business needs, and you might go through many different channels to get it. When you lend money for your business, there’s a good chance you might be given a promissory note. 

While promissory notes can help give you access to the funds your business needs, these can be complicated. When you owe a lender money, whether it be a traditional lender or even family members or friends, you need a clear understanding of the terms and conditions you’re agreeing to. The entrepreneurial law attorney at Tressler & Associates can assist you with any promissory loans you require for your business. 

How Does a Promissory Note Work?

A promissory note is a legal document where a borrower promises to pay back money to a lender. This ensures that there’s a record that the money was loaned and needs to be repaid. When someone, whether it be an organization or an individual, wants to help your business get the funding it needs, a promissory note works as a lending agreement between you and them. Without this information outlined and agreed to by both parties, the borrower could later claim the money was a gift or the lender may claim they’re owed more than they actually are. Because of this, a clearly written promissory note is essential to protect the interests of both parties.

What Does a Promissory Note Need to Include?

A promissory note should include the following information:

  • The names of the lender and borrower.
  • The amount of money borrowed.
  • The interest rate, if there is one.
  • When payments will begin and how frequently they will occur.
  • How much the payments are.
  • When the loan will be repaid by.
  • Signatures and dates from the lender and borrower.

In the state of Tennessee, it is not required to have a promissory note notarized for it to be valid.

Types of Promissory Notes

There are a few different types of promissory notes that can be used depending on the terms and conditions of the loan. The complexities of promissory notes can also vary greatly, so it’s essential that you have an experienced entrepreneurial law attorney helping you.

Simple Promissory Note: A simple promissory note may be used when the loan is being paid back in a lump sum. For example, a friend lends you $1,000 for your business and requests one payment for the whole loan on a specific date.

Demand Promissory Note: When this type of promissory note is used, the borrower agrees to pay back the amount borrowed when the lender requests it. This is different from other types of promissory notes where the payment date is agreed to in advance.

Secured Promissory Note: With a secured promissory note, the borrower must secure the loan with one of their assets. If the borrower does not repay the loan, the lender can seize the asset.

Unsecured Promissory Note: Unlike a secured promissory note, an unsecured promissory note does not have any type of insurance attached to it for the lender. However, the lender can still take legal action against the borrower if they fail to repay the amount they borrowed.

Contact an Entrepreneurial Law Attorney to Protect Your Interests

Promissory notes can get extremely complicated, and whether you’re the borrower or the lender, you need to ensure you’re protected during this process. You don’t want to take any risks when it comes to borrowing or lending any amount of money, which is where an entrepreneurial law attorney comes in. At Tressler & Associates, we can help draft and review any documents you need, such as a loan promissory note, to ensure you can agree to the terms and conditions confidently.

Contact Tressler & Associates today to learn more about how we can help.

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