What this form is for
A Promissory Note is used when a business borrows money and needs to document the repayment promise in writing. Lenders require this legally binding document to establish the loan amount, interest rate, payment schedule, and what happens if you miss payments.
Before you start
- Loan amount, interest rate (annual percentage), and whether interest is simple or compounded
- Complete legal names and addresses for both borrower (you or your business entity) and lender
- Payment schedule details: amount of each payment, frequency (monthly, quarterly), and total number of payments
- Final maturity date when the entire balance must be repaid
- Your business formation documents if borrowing as an LLC or corporation, not as an individual
Step-by-step
1. Fill in the date you are signing the note and the city and state where you are signing it (this establishes which state law governs the agreement).
2. Enter the principal amount being borrowed in both numerals and written words to prevent disputes.
3. Identify the borrower with full legal name and address. If your business is the borrower, use the exact entity name from your formation documents and specify the entity type.
4. Identify the lender with complete legal name and address. Verify spelling precisely as it appears on their banking documents.
5. State the annual interest rate as a percentage. In Ohio, there is no general usury cap for business loans, but confirm the rate matches your loan agreement.
6. Specify the payment terms: payment amount, due date of each payment (such as first day of each month), where payments should be sent, and the date of the final payment.
7. Describe any security or collateral pledging specific assets if this is a secured note, or state that the note is unsecured.
8. Complete the default and acceleration clause section, which explains late fees, grace periods, and the lender's right to demand full payment immediately if you miss payments.
9. Add any prepayment terms if you want the option to pay off the loan early without penalty.
10. Sign and date the note. If the borrower is a business entity, the authorized officer must sign and print their title. Consider having the signature notarized even if not required, as it strengthens enforceability.
What lenders look for
- Banks expect payment terms that match your cash flow projections submitted with other loan documents. Inconsistent numbers raise red flags and delay approval.
- Missing or vague default terms make the note harder to enforce. Specify exact grace periods (such as 10 days) and late fee percentages to show you understand professional lending standards.
- Personal guarantees are typically required for small business loans. If you sign both as the business and personally, you remain liable even if the business fails.