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A promissory note is a financial instrument that is a written promise from one party to pay back another party a set sum of money, either on demand or at a specific date in the future.
The promissory note contains all the terms of the borrower’s indebtedness. This includes the principal amount of the loan, any interest rate applied to the loan, the maturity date, and the date and place the note was issued.
A promissory note can be issued by a financial institution, but it is rare. Typically, a promissory note is a debt instrument that allows an individual or a company to get funds from a source other than a bank or financial institution. The issuer of a promissory note can be any individual or company that is willing to provide the financing under the agreed upon terms.
In some instances, a promissory note may be a security. When issuing a promissory or receiving a promissory note that is a security, be sure you are obeying securities laws. If you are unsure if your promissory note is a security, you should consult a securities lawyer