Promissory Notes

Promissory Contract Terms and Conditions

Every promissory note contains specific terms and conditions, which include the following:

• Amount of the loan
• Term of the loan (including the date by which it must be paid in full)
• Interest rate
• Penalties and late fees
• Collateral used to secure the loan (if any)
• Repayment schedule (installment payments, balloon payments, or on-demand)
• Consequences if the loan is in default
• Parties to the loan

In addition, the note may include whether the loan can be prepaid without penalty and other terms as agreed upon between the parties. It should also address state law when applicable. For example, under Florida law, lenders are required to pay a stamp tax, which is 35 cents for every $100 of the amount borrowed under the note. This tax is capped at $2,450 per loan.

Additional Considerations

In addition to drafting promissory notes, our attorneys have extensive experience assisting clients with legal issues related to promissory notes. For example, where a loan was taken without a promissory note or the note did not adequately represent the agreement as understood between one or more parties.

To avoid issues that can arise from the lack of a promissory note, an inadequate note, or an unenforceable note, we strongly recommend the following:

• Use a promissory note when you are borrowing money from family or friends to avoid later confusion or unmet expectations.
• Do not use an online form to create a promissory note. These documents are broad and may have standard terms and conditions that do not reflect your situation or protect your interests.
• Do not sign a promissory note until you fully read and understand the terms.

Thrift McLemore will draft or review a promissory note to assure that your interests are protected and that the terms, especially interest, penalties, late fees, and repayment schedule, are reasonable. Our attorneys will also explain how your legal business structure may result in personal liability for the loan if the business fails or the loan is otherwise in default.

Our Aim

Our aim is to assure that your promissory note provides the capital you require for your business with terms and conditions that protect your interests. Our attorneys also strive to limit your personal liability in the event that the loan falls into default.