Promissory Note (US)
Updated 30 July 2026
This template is a business-to-business promissory note used for shareholder loans, working capital advances, or deferred purchase prices. It outlines the repayment terms, interest rates, events of default, and options for both secured and unsecured lending arrangements.
PROMISSORY NOTE
Note: This template is a business-to-business promissory note: a written promise by one business to repay money it has borrowed from another. Use it for a shareholder loan, a working capital advance, a loan between related companies, or the deferred portion of a purchase price. It is not designed for consumer lending, which is heavily regulated at both federal and state level, and it is not designed for a convertible note used in a venture financing, which needs conversion mechanics this template does not have. Complete every yellow field and complete Exhibit A.
Principal Amount: $[principal amount] Date: [note date]
Place of execution: [city and state of execution]
FOR VALUE RECEIVED, [full legal name of the borrower], a [entity type and state of organization of the borrower] (the "Borrower"), promises to pay to the order of [full legal name of the lender], a [entity type and state of organization of the lender] (the "Lender"), the principal sum of $[principal amount], together with interest, on the terms set forth in this Promissory Note (this "Note").
1. PAYMENT OF PRINCIPAL AND INTEREST
1.1 Interest rate. Interest accrues on the outstanding principal balance from the date of this Note at the rate of [interest rate (percent per annum)] percent per annum, calculated on the basis of a 365-day year and the actual number of days elapsed.
Note: State law sets the maximum interest a lender may charge, and the limits differ substantially from state to state. Many states apply a higher cap, or no cap at all, to loans between businesses than to consumer loans, and some remove the cap entirely above a stated principal amount. Confirm the current usury limit in the governing state chosen in Section 10.1 before setting the rate. Section 6.2 contains a savings clause, but a savings clause is a backstop, not a substitute for checking the cap.
Note: Charging little or no interest has a tax consequence. Where the rate is below the applicable federal rate published monthly by the IRS, Internal Revenue Code Section 7872 can impute interest to the lender as income even though no interest was actually received. For a loan between related businesses or between a company and its owner, setting the rate at or above the applicable federal rate for the relevant term avoids that outcome.
1.2 Repayment.
Note: Use Option A, Option B, or Option C.
Note: Use Option A for a short-term advance repaid in one payment on a fixed date. Use Option B where the borrower will amortize the loan through regular equal payments. Use Option C where the borrower needs to preserve cash early and can refinance or repay the balance at maturity, which is common for property and equipment purchases but carries refinancing risk at the balloon date.
Option A (single payment at maturity): The entire outstanding principal balance, together with all accrued and unpaid interest, is due and payable in full on [maturity date] (the "Maturity Date").
Option B (equal installments): The Borrower shall pay the principal and accrued interest in [number of installments] consecutive equal installments of $[installment payment amount] each, payable on the [payment day of the month (e.g. first)] day of each [payment frequency (e.g. month)], beginning on [first payment date], with the entire remaining balance due and payable on [maturity date] (the "Maturity Date").
Option C (interest only, then balloon): The Borrower shall pay accrued interest only, in arrears, on the [payment day of the month (e.g. first)] day of each [payment frequency (e.g. month)], beginning on [first payment date]. The entire outstanding principal balance, together with all accrued and unpaid interest, is due and payable in a single balloon payment on [maturity date] (the "Maturity Date").
1.3 Application of payments. Payments are applied first to accrued and unpaid interest, then to any fees and costs due under this Note, and then to the reduction of principal.
1.4 Manner of payment. All payments are payable in lawful money of the United States to the Lender at [payment address or account details of the lender], or at such other place as the Lender designates in writing. If a payment falls due on a day that is not a business day, it is payable on the next business day.
2. PREPAYMENT
2.1 The Borrower may prepay this Note in whole or in part at any time without penalty or premium. Any partial prepayment is applied in accordance with Section 1.3 and does not relieve the Borrower of the obligation to make subsequent scheduled payments as they become due, unless the Lender agrees otherwise in writing.
Note: Prepayment without penalty is the standard position in a business note and is the position drafted here. A lender who is relying on a fixed return over the full term may instead want a prepayment premium or a make-whole payment. If so, that has to be stated expressly, because without it the borrower is free to refinance the moment rates move in its favor.
3. SECURITY
Note: Use either Option A or Option B.
Note: Use Option A where the loan is unsecured, which is common for smaller advances and loans between related parties. Use Option B where the lender takes collateral. Option B is a statement that collateral is being given: it does not by itself create an enforceable security interest, which requires a separate security agreement and, in most cases, a UCC-1 financing statement filed in the right state to give the lender priority over other creditors.
Option A (unsecured): This Note is unsecured. No collateral secures the Borrower's obligations under this Note.
Option B (secured): This Note is secured by the collateral described in the security agreement between the Borrower and the Lender dated [security agreement date] (the "Security Agreement"), covering [description of the collateral]. The Borrower shall execute and deliver all documents, and take all actions, that the Lender reasonably requests to create, perfect, and maintain a first priority security interest in the collateral. It is a condition to the advance of the principal that the Security Agreement has been executed and that all filings and other steps necessary to perfect the Lender's security interest have been completed to the Lender's satisfaction.
Note: A security interest is created by the security agreement and is generally perfected by filing a UCC-1 financing statement with the appropriate state office. An unperfected security interest can be defeated by another creditor or by a bankruptcy trustee, so the filing is what gives the collateral its value to the lender. Perfection rules vary by collateral type, and some assets require a different method entirely.
4. EVENTS OF DEFAULT
4.1 Each of the following is an event of default under this Note:
(a) the Borrower fails to pay any amount when due under this Note and that failure continues for [payment cure period (days, e.g. 10)] days after written notice from the Lender;
(b) the Borrower breaches any other obligation under this Note or under the Security Agreement, if any, and that breach continues for [non-payment cure period (days, e.g. 30)] days after written notice from the Lender;
(c) any representation made by the Borrower in connection with this Note proves to have been materially false when made;
(d) the Borrower makes an assignment for the benefit of creditors, admits in writing its inability to pay its debts as they become due, or has a receiver appointed over all or a substantial part of its assets;
(e) the Borrower commences a voluntary case under the United States Bankruptcy Code, or an involuntary case is commenced against the Borrower and is not dismissed within 60 days; or
(f) the Borrower dissolves, liquidates, or ceases to carry on all or substantially all of its business.
Note: A cure period on payment default protects the borrower against losing the whole loan over an administrative slip such as a failed transfer. Ten days for payment defaults and 30 days for other defaults is a common arrangement in business notes. A lender who wants a faster route can shorten these, but a note with no cure period at all is aggressive and can make a minor lapse into a full acceleration.
Note: The bankruptcy limbs in (d) and (e) are standard, but their practical effect is limited once a bankruptcy case has actually started, because the automatic stay under Section 362 of the Bankruptcy Code stops most collection activity and ipso facto clauses are generally unenforceable against the estate. They remain useful for the pre-filing situations described in (d).
5. REMEDIES
5.1 Acceleration. On the occurrence of an event of default, the Lender may, by written notice to the Borrower, declare the entire outstanding principal balance and all accrued and unpaid interest immediately due and payable. On an event of default under Section 4.1(e), that amount becomes immediately due and payable without notice or demand.
5.2 Default interest. From and after an event of default, and for so long as it continues, interest accrues on the entire outstanding balance at the rate of [default interest rate (percent per annum)] percent per annum, or the maximum rate permitted by applicable law, whichever is lower.
Note: Default interest must be a genuine estimate of the lender's additional cost and risk, not a penalty. A default rate set far above the contract rate can be struck down as an unenforceable penalty, and it also raises the usury question, because most states measure the cap against the rate actually charged including the default rate. A default rate of a few percentage points above the contract rate is the usual approach.
5.3 Late charge. If any payment is not received within [late charge grace period (days, e.g. 10)] days of its due date, the Borrower shall pay a late charge of [late charge percentage] percent of the overdue payment, or the maximum amount permitted by applicable law, whichever is lower.
5.4 Costs of collection. The Borrower shall pay all reasonable costs and expenses the Lender incurs in collecting amounts due under this Note or enforcing its rights, including reasonable attorneys' fees, whether or not suit is filed.
Note: Attorneys' fees are recoverable only where a statute or a contract provides for them, so this clause is what makes collection costs recoverable. Some states will read a one-sided fee provision as reciprocal, entitling the borrower to fees if the borrower prevails.
5.5 Remedies cumulative. The Lender's rights and remedies under this Note are cumulative and may be exercised singly or together. No delay or omission in exercising any right operates as a waiver of it, and a waiver on one occasion does not waive that right on any other occasion.
6. BORROWER WAIVERS AND USURY SAVINGS
6.1 Waivers. The Borrower and all endorsers, sureties, and guarantors waive presentment for payment, demand, protest, notice of protest, notice of dishonor, and notice of acceleration, and consent to any extension of time for payment, to the release of any party liable, and to the release, substitution, or impairment of any collateral, in each case without notice and without affecting their liability under this Note.
6.2 Usury savings. Notwithstanding anything in this Note to the contrary, the total amount of interest and any other charges treated as interest under applicable law shall not exceed the maximum amount permitted by applicable law. If any amount charged or received under this Note would exceed that maximum, the excess shall be applied to reduce the outstanding principal balance, and any remaining excess shall be refunded to the Borrower. The parties intend to conform strictly to the applicable usury laws.
Note: This clause is a backstop against an inadvertent breach of the usury cap, and courts in most states will give it effect. It is not a licence to set a rate above the cap and rely on the clause to fix the problem, because a court that finds the lender intended to charge a usurious rate can disregard the savings clause. Some states impose severe consequences for usury, including forfeiture of all interest and in some cases the principal.
7. REPRESENTATIONS OF THE BORROWER
7.1 The Borrower represents that it is duly organized and validly existing under the laws of its state of organization, that it has full power and authority to execute and perform this Note, that this Note has been duly authorized and constitutes its legal, valid, and binding obligation, and that the execution and performance of this Note do not breach any other agreement to which it is a party. The Borrower further represents that the loan evidenced by this Note is made solely for business or commercial purposes and not for personal, family, or household purposes. As a condition to the advance of the principal, the Borrower shall deliver to the Lender a copy of the resolution or written consent of its board, members, or other governing body authorising the borrowing and the execution of this Note.
Note: The business purpose representation matters. Most state usury exemptions and most exclusions from consumer lending regulation depend on the loan being for a commercial purpose, so recording that fact on the face of the Note supports the exemption the lender is relying on.
8. COVENANTS
8.1 Affirmative covenants. Until this Note is paid in full, the Borrower shall maintain its legal existence and good standing, pay its taxes when due, maintain insurance customary for its business, keep proper books and records, and notify the Lender promptly of any event of default or any event that with notice or the passage of time would become one.
8.2 Negative covenants.
Note: Use either Option A or Option B.
Note: Use Option A where the loan is unsecured, or secured only lightly, and the lender is relying on the borrower's continuing financial position. Use Option B for a small advance between parties who know each other well, where the administrative burden of monitoring covenants outweighs the protection. An unsecured note with no negative covenants gives the lender nothing between signing and default, which is the single most common weakness in a business note.
Option A (covenants apply): Until this Note is paid in full, the Borrower shall not, without the Lender's prior written consent: (a) incur indebtedness for borrowed money in excess of $[permitted additional debt basket] in the aggregate, other than trade payables incurred in the ordinary course; (b) grant any lien on its assets other than liens existing at the date of this Note and liens arising by operation of law in the ordinary course; (c) sell, lease, or otherwise dispose of assets outside the ordinary course of business with a value exceeding $[permitted asset disposal threshold] in any twelve month period; (d) declare or pay any dividend or make any distribution or redemption in respect of its equity while any payment under this Note is overdue; or (e) enter into any merger or consolidation in which it is not the surviving entity, or sell all or substantially all of its assets.
Option B (no negative covenants): The Borrower gives no negative covenants under this Note. The Lender acknowledges that the Borrower is free to incur further indebtedness, grant liens, dispose of assets, and make distributions without the Lender's consent.
Note: Setting the baskets in Option A too low turns ordinary trading into a default, and setting them too high makes the covenant meaningless. Size them against the borrower's normal course of business rather than against the loan. Option B is a deliberate choice to rely on the default and acceleration provisions alone, and is stated expressly so that the absence of covenants is a decision rather than an oversight.
9. ASSIGNMENT
9.1 The Lender may assign or transfer this Note, in whole or in part, without the Borrower's consent, and the transferee shall have all of the Lender's rights under it. The Borrower may not assign or delegate any of its obligations under this Note without the Lender's prior written consent, and any attempted assignment without that consent is void.
10. GENERAL PROVISIONS
10.1 Governing law. This Note is governed by the laws of the State of [governing law state], without regard to its conflict of laws principles.
Note: The governing state determines the usury cap, the enforceability of the default rate and late charge, and the availability of attorneys' fees. Parties usually choose the lender's home state or the state where the borrower's assets are located. A state with no reasonable connection to either party or to the transaction may not be respected by a court.
10.2 Venue. The Borrower consents to the exclusive jurisdiction of the state and federal courts located in [county and state for venue] for any action arising out of or relating to this Note.
10.3 Notices. Notices under this Note must be in writing and are effective on personal delivery, on the next business day after deposit with a nationally recognized overnight courier, or three business days after deposit in the United States mail, postage prepaid, certified or registered, in each case addressed to the party at the address set forth in Exhibit A or such other address as that party designates in writing.
10.4 Severability. If any provision of this Note is held invalid or unenforceable, it shall be modified to the minimum extent necessary to make it enforceable, or if that is not possible, severed, and the remaining provisions shall continue in full force.
10.5 Entire agreement and amendment. This Note, together with the Security Agreement if any, is the entire agreement between the parties concerning the loan it evidences and supersedes all prior discussions. It may be amended only by a written instrument signed by both parties. Nothing in this Section limits or excludes liability for fraud.
10.6 Electronic signature. This Note may be executed and delivered electronically, and an electronic signature has the same legal effect as an original signature.
10.7 Time of the essence. Time is of the essence with respect to every obligation under this Note.
10.8 WAIVER OF JURY TRIAL. EACH PARTY KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE, THE SECURITY AGREEMENT IF ANY, OR THE TRANSACTIONS CONTEMPLATED BY THEM. EACH PARTY ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO THE OTHER PARTY ENTERING INTO THIS NOTE.
Note: A jury-trial waiver is standard in loan documents and is generally enforceable, though a few states restrict or refuse to enforce pre-dispute waivers, and some require the waiver to be conspicuous to be effective. That is why this clause is set in capitals. Confirm the position in the governing state chosen in Section 10.1. Where a waiver would not be enforceable, the usual alternative is a judicial reference or arbitration provision.
THE BORROWER HAS EXECUTED THIS NOTE AS OF THE DATE FIRST WRITTEN ABOVE
BORROWER
Name of entity: [full legal name of the borrower]
Signature: ...................................
Printed name: [printed name of the borrower signatory]
Title: [title of the borrower signatory]
Date: [signature date of the borrower]
Note: A promissory note is a one-sided promise, so only the Borrower needs to sign for it to be enforceable. Where the Note is secured, or where the parties want the Lender bound to the prepayment and assignment terms, the Lender should countersign below.
LENDER (countersignature optional)
Name of entity: [full legal name of the lender]
Signature: ...................................
Printed name: [printed name of the lender signatory]
Title: [title of the lender signatory]
Date: [signature date of the lender]
Note: For US tax purposes, the Borrower may need a completed IRS Form W-9 from the Lender before paying interest, because interest paid on a business loan is generally reportable. Do not include a taxpayer identification number in this Note.
EXHIBIT A - KEY COMMERCIAL TERMS
Note: Complete this Exhibit before execution. In case of conflict with the terms above, this Exhibit prevails.
Part 1 - Parties
Note Date: [note date]
Borrower: [full legal name of the borrower]
Borrower entity type and state: [entity type and state of organization of the borrower]
Borrower notice address: [notice address of the borrower]
Lender: [full legal name of the lender]
Lender entity type and state: [entity type and state of organization of the lender]
Lender notice address: [notice address of the lender]
Part 2 - Loan Terms
Principal Amount: [principal amount]
Interest Rate (Section 1.1): [interest rate (percent per annum)]
Repayment option chosen (Section 1.2): [repayment option chosen (a - single payment, b - equal installments, or c - interest only with balloon)]
Maturity Date: [maturity date]
First payment date, if Option B or C: [first payment date]
Payment frequency, if Option B or C: [payment frequency (e.g. month)]
Payment day, if Option B or C: [payment day of the month (e.g. first)]
Number of installments, if Option B: [number of installments]
Installment amount, if Option B: [installment payment amount]
Payment address or account: [payment address or account details of the lender]
Part 3 - Security
Security option chosen (Section 3): [security option chosen (a - unsecured, or b - secured)]
Security Agreement date, if Option B: [security agreement date]
Collateral, if Option B: [description of the collateral]
Part 4 - Default and Remedies
Payment cure period (Section 4.1(a)): [payment cure period (days, e.g. 10)]
Other cure period (Section 4.1(b)): [non-payment cure period (days, e.g. 30)]
Default interest rate (Section 5.2): [default interest rate (percent per annum)]
Late charge grace period (Section 5.3): [late charge grace period (days, e.g. 10)]
Late charge percentage (Section 5.3): [late charge percentage]
Part 5 - Covenants
Negative covenants option chosen (Section 8.2): [negative covenants option chosen (a - covenants apply, or b - none)]
Permitted additional debt basket, if Option A: [permitted additional debt basket]
Permitted asset disposal threshold, if Option A: [permitted asset disposal threshold]
Part 6 - Governing Law
Governing law state (Section 10.1): [governing law state]
Venue (Section 10.2): [county and state for venue]
Place of execution: [city and state of execution]
About this template
What is this template?
Promissory Note (US) is a free, ready-to-use Banking and finance template you can open, customize, and download on GitLaw. It gives you a professionally structured starting point, so you never have to draft from a blank page. The wording is plain and modern, organized into clear sections that are easy to read, edit, and adapt to your own situation before you share or sign it.
When should you use it?
Reach for this Banking and finance template whenever you need a reliable agreement quickly and want to be sure the essentials are covered. It suits individuals, freelancers, startups, and established businesses alike. Instead of paying for a document drafted from scratch, you can start here, tailor the details to your arrangement, and have a polished draft ready in minutes. This version is drafted with United States of America in mind, though you should always review the final wording against the laws that apply to you.
What's typically included?
A well-drafted Banking and finance usually sets out the parties involved, the scope of the agreement, and each side's rights and responsibilities. Expect sections covering key terms and definitions, how long the agreement lasts, how it can be ended, and what happens if something goes wrong. This template brings those building blocks together in a sensible order, so you can focus on the specifics rather than worrying about what to include. Open it to read the full document, then sign up to edit, negotiate, and e-sign it directly in GitLaw.