This document sets forth the terms of a business loan agreement between two parties,
whereby one party is borrowing funds from an individual, and the other party is a
business. It contains numerous standard provisions as well as optional provisions that
may be added to ensure the parties’ needs are met. This agreement is useful to
businesses wishing to obtain a loan from an individual, or for individuals wishing to give
out business loans.
Business Loan from an Individual
Borrower Information:
[Instruction: Insert Name, Address of Borrowing Party.]
Lender Information:
[Instruction: Insert Name, Address of Lending Party.]
AMOUNT: $________________ DUE: _____________________
INTEREST: _________ (___%) PERCENT
[Instruction: Insert applicable terms.]
For value received, _________________, (the “Borrower”) [Instruction: Insert borrower
name.] the undersigned, hereby unconditionally promises to pay to the order of
___________________, (the “Lender”) [Instruction: Insert Lender name.] at
_______________________, [Instruction: Insert address of Lending Party.] or at such other
address as he/she/it in writing may direct, without any right of deduction, set-off or abatement
whatsoever, the principal sum of _________________ ($_____________) [Instruction: Insert
principal sum.] United States Dollars (the “Principal”), with interest accrued, at the rate of
__________ (___%) per annum [Instruction and Comment: Insert interest rate. Parties may
customize to different computation period, for example, monthly interest rate. Further, if
the interest rate is to be variable, remove the word “fixed” and insert variable, and state
initial percentage rate and attach rate change schedule], to become due and payable on the
____ day of ______________, _______. [Instruction: Insert due date.] [Comment: Parties
may revise the foregoing language to reflect the true nature of agreement between parties,
including a payment schedule, for example, if the loan is to be paid based on a balloon
payment or otherwise.]
The parties hereto understand, acknowledge and agree that the loan set forth in this Promissory
Note is being made to Borrower in order that Borrower may _____ [Instruction: Set forth
business purpose, for example, commence operations of XYZ business, or expand operations
of XYZ business, etc.] (the “Business”) and it is a condition of the loan that the moneys paid
hereunder be used exclusively for that purpose. [Comment: If this is not a condition of the
loan, or any other conditions exist, parties may revise this language.]
1. Borrower hereby promises to pay the Principal and the interest accrued to Lender in equal
and consecutive __________________ (monthly/quarterly/yearly) installments in the amount
of __________________ ($________) Dollars (per month/per quarter/per year) commencing
on the ______ day of __________, 20____ and each and every ______ day of
______________ thereafter, with a final installment of Principal and interest due and payable
on the _____ day of ____________, _______. [Instruction: Insert applicable terms.]
2. The entire amount of Principal outstanding hereunder and any accrued interest thereon, is
secured by way of _____________________________ [Instruction: Insert collateral being
securitized. If substantial number of items, you may attach as a separate schedule.]
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(the “Collateral”) and may become due and payable, without notice or demand, in the event
of any one or more following events of default:
A. any monthly instalment of Principal and interest not paid when due and which
remains unpaid for a period of ___________ (___) days thereafter; or
B. any change in ownership of/or in the Collateral, without the prior written consent
of Lender; or
C. any default as defined in the Collateral securing this Promissory Note; or
D. any bankruptcy or insolvency proceedings that are brought by or against the
undersigned; or
E. discontinuance by Borrower or otherwise a failure by Borrower to continue to
operate the Business as same is operated as of the date of this Promissory Note.
Should any amount(s) that become due under this Promissory Note not be paid in full in
accordance with its terms and provisions, the undersigned hereby agrees to pay to Lender all
reasonable associated costs, fees and expenses (including without limitation, reasonable
attorney’s fees) for the collection of same.
3. [Comment: State here if any business conditions or benchmarks must be met by
Borrower in connection with this loan.]
4. In the event of payment of interest or any other amounts secured by this Promissory Note or
upon the bankruptcy or insolvency of the undersigned or upon the filing of a petition in
bankruptcy against the undersigned or upon the making of a proposal in bankruptcy by the
undersigned (whether or not such bankruptcy or insolvency filing is by the undersigned
personally or by the business set forth herein), the whole of the monies (or any part thereof)
secured by this Promissory Note remaining unpaid shall, at the option of the Lender,
forthwith become due and payable and all the powers in and by the Promissory Note or by
law conferred in case of default shall become exercisable.
5. The undersigned hereby waives the benefits of division and discussion, demand and
presentment for payment, notice of non-payment, protest and notice of protest of this
Promissory Note.
6. No course of dealing between the undersigned and Lender or any delay on the part of Lender
in exercising any rights hereunder or waiver of any instance of breach shall operate as a
waiver of any rights of Lender. All of the covenants, stipulations, promises and agreements
contained in this Promissory Note made by or on behalf of the undersigned shall bind
his/her/its heirs, executors, administrators, successors and assigns, whether so expressed or
not.
7. Lender may assign any or all of its rights hereunder to any other party. The rights of Lender
to receive payment hereunder shall be payable to Lender’s heirs, executors, administrators,
successors and assigns, as the case may be, in the event of Lender’s death. Borrower shall
not be relieved of the obligation to pay hereunder in the event of Lender’s death. [Comment:
Parties may revise this language to relieve Borrower of all or some of the payment
obligation hereunder in the event of Lender’s death. Parties may wish to review this
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provision with their respective estate planning attorneys, particularly in an instance of
a parent loaning money to a child, as any forgiveness may have estate tax implications.]
8. The undersigned may, at any time, without notice, bonus or penalty, prepay or cause to be
prepaid the whole or any part of the principal and the interest accrued amount remaining
unpaid hereunder. Any payments made in excess of any interest only payment due shall be
applied first to any late charges then due and owing, then to any NSF charges then due and
owing, then to any interest then due and owing. The remainder of any such excess payment
shall then be applied to the principal.
9. This promissory note is shall be governed and construed in accordance with the applicable
state laws of ______________________.
10. [Option: At the parties’ option, the Promissory Note can be made assignable using the
following language. If only one party is to be permitted to assign the rights and
obligations under the Promissory Note, this can be modified to state which party is
permitted to assign. If this optional language is used, please conform the language
above regarding Lender’s right to assign.] The Borrower covenants and agrees not to
assign any of the obligations under this Note, except by express, written consent of
Lender. Borrower shall, however, be permitted to assign its rights to receive money
under this Note, without the consent of Lender. An assignment without the prior
written consent of Lender shall be absolutely null and void and shall, at Lender’s
option, terminate this Note. In the event of same, at Lender’s option in its sole
discretion, all principal and interest due under this Note may become immediately due
and payable in full. Lender shall have the right to assign its rights and obligations
under this Note without any consent by Borrower.
11. Both parties agree that this Promissory Note is the complete and exclusive statement of the
mutual understanding of the parties and supersedes and cancels all previous written and oral
agreements and communications relating to the subject matter of this Promissory Note. Any
change to this Promissory Note, other than a change in Lender’s address, shall be in a writing
signed by both parties.
12. The pronouns used herein shall include, where appropriate, either gender or both, singular
and plural.
13. This Promissory Note or any subsequent amendment or modification hereto may be executed
by facsimile and/or in one or more counterparts, each of which when so executed and
delivered shall be deemed an original, but all of which taken together shall constitute but one
and the same original. Each party shall accept any such signed faxed counterpart as full
execution of this Promissory Note or any subsequent amendment or modification thereto.
14. If any provision of this Promissory Note shall be adjudged by any court of competent
jurisdiction to be unenforceable or invalid, that provision shall be limited or eliminated to the
minimum extent necessary so that this Promissory Note shall otherwise remain in full force
and effect and enforceable.
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In Witness Hereof, we have executed this Promissory Note this ___ day of ___, 20__.
[Instruction: Insert date.]
________________________
Borrower
________________________
Lender
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