Promissory note are a common type of business agreements our Charleston business law firm routinely develops for clients. Promissory notes are common for new start-up businesses, particularly in real estate and retail ventures where there is a need for significant start-up capital. Promissory notes may be used in almost any situation where one party agrees to loan money to another (or to the business entity) as a formal agreement between the parties. Although they are often short and simple, promissory notes are nonetheless important, and must be drafted carefully.
Generally, a promissory note will touch on a number of issues, including the amount of money owed, the sources for the money, the repayment schedule, the duration within which the note must be repaid, interest charged, requirements for security collateral (if any), the terms for any repayment acceleration, and the conditions regarding any installment payments allowed.
Additionally, a promissory note will set forth the legal consequences for a breach of promissory note terms or default on the repayment of the loan. Once the promissory note is properly executed, the parties have entered into a legal contract that can be enforced under the law. However, it must be noted that like the majority of legal documents our law firm develops, the promissory note may be, and often is, amended or modified by agreement of the parties involved.