Promissory Notes

A promissory note is a written promise to repay a loan. Also known as a loan contract, a promissory note contains terms and conditions, including:

• Amount of the loan
• Interest rate, penalties and late fees
• Any collateral used to secure the loan
• Repayment schedule (i.e., installment payments, full payment due on a certain date or on demand)
• Consequences of default (i.e., what happens if the borrower misses a payment or fails to repay the loan on the due date)

The note should also require the borrower to pay the lender’s attorneys’ fees and costs associated with enforcing the note through litigation caused by the borrower’s default. If the borrower is a corporation, a personal or third-party guarantee should accompany the note, or both the corporation and an individual should be named as borrowers on the note.

Florida state tax law requires lenders to pay 35 cents for every $100 of the amount borrowed under the promissory note. Lenders who have not paid this tax, which is capped at $2450 if the note is not secured by Florida real property, should know that the majority of Florida courts will dismiss or delay an enforcement action on a promissory note until the tax is paid. However, the Fourth District Court of Appeals maintains that payment is not a prerequisite to enforcement.

There are hundreds of promissory note templates on the internet which look pretty simple. However, you may not be adequately protecting your interests by using one of these forms. A promissory note drafted or reviewed by our attorneys can make the difference between a good investment and a bad uncollectible debt.