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A promissory note is a written promise by one party to make a payment of money at a date in the future. Although potentially issued by financial institutions, other organizations or individuals can use promissory notes to confirm the agreed terms of a loan.
?Definition? A company may accept a promissory note to exercise compensatory options. Essentially, a promissory note is like giving an ?IOU? to the company instead of paying the company cash for shares. The note may either be a recourse promissory note or non-recourse promissory note.
A promissory note is simply a form of debt - like a loan or an IOU - that a company may issue to raise money. An investor typically agrees to loan money to a company in exchange for the company's promise that it will pay back the amount, plus interest, over a specific time period.
Convertible notes are promissory notes that serve an additional business purpose other than merely representing debt. Convertible notes include all of the terms of a vanilla promissory note, such as an interest rate and the pledge of underlying security (if applicable).
A promissory note is used for mortgages, student loans, car loans, business loans, and personal loans between family and friends. If you are lending a large amount of money to someone (or to a business), then you may want to create a promissory note from a promissory note template.
Typically, promissory notes are securities. They must be registered with the SEC, a state securities regulator, or be exempt from registration.