Promissory Note (US)
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.
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United States note
This version is drafted for US law generally. Contract, employment and consumer rules vary by state — for example on non-competes and at-will employment. Tell GitLaw which state applies and it adjusts the draft.
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