Promissory note, twelve month term note
Promissory note template
A timber company owes $45,000 to a private lender and needs one page that says so. No conditions precedent, no covenants, no security. Only the maker signs, which is what keeps a note short and what lets the holder pass it on to somebody else.
The document, page by page
Every page as it renders and as it prints, with nothing summarised. Read the wording before you reuse it.
Section by section
What each section is for, so you can keep the ones you need and drop the rest.
- Letterhead and headline terms
- A ledger letterhead carrying the maker's company details, then a stats row with the principal, rate, issue date and maturity, footnoted with the note number and a reminder that only one original exists.
- The promise
- The operative paragraph opening for value received, naming the maker and the holder or its order, the sum in words and figures, and the date payment falls due.
- A note is not a contract of two sides
- An information panel drawing the line between a note and a loan agreement, and explaining why only the maker signs.
- 1. What is owed
- The principal advanced and acknowledged, simple non compounding interest at 7 percent, quarterly payments of $787.50, and a four row schedule totalling $48,150.00.
- 2. How and where to pay
- Electronic transfer in Australian dollars, payment taken as made when funds clear, no deduction or set off for any unrelated dispute, and prepayment at any time without penalty.
- 3. If a payment is missed
- Default at ten business days or on insolvency, acceleration of the whole balance by written notice, default interest at 11 percent, and recovery costs on a solicitor and client basis.
- 4. Transfer and waivers
- The holder may endorse and deliver the note onward, the maker may not transfer at all, presentment and protest are waived, and delay in enforcing is not a waiver.
- 5. General
- The note is unsecured with nothing registered, the advance is for business purposes described in the clause, New South Wales law governs, and unenforceable parts are severed.
- Keep the original
- A warning panel on storing the signed original securely and handing it back marked cancelled once the final payment clears, since a scan makes both steps harder to prove.
- Execution
- A statement of where and when the note was signed, a signature block for the maker through an authorised director, and a witness block for name, address and date.
Clauses in this document
What makes this document work
It stays one sided, which is the whole point
There is nothing here the holder has to do, so there is nothing the holder can breach. That is what lets the note be handed to a third party by endorsement and delivery without renegotiating anything, and it is why the document runs to a handful of clauses instead of a contract's worth.
Interest is scheduled, not left to accrue in silence
Four dated rows of $787.50, three of them interest only and the last carrying the principal, adding to $48,150.00. The holder finds out on 2 January 2027 whether the maker is in trouble rather than on the maturity date, and the maker has a number to budget against each quarter.
It admits out loud that it is unsecured
Clause 5.1 says no security interest is registered and the holder ranks with the other unsecured creditors if the maker becomes insolvent. Plenty of notes leave that unsaid and let the lender assume the timber stock stands behind it. Saying it in the document is what makes the 7 percent rate an informed decision.
Questions people ask
What makes a document a promissory note?
Under Part IV of the Bills of Exchange Act 1909, a promissory note is an unconditional promise in writing made by one person to another, signed by the maker, to pay a certain sum of money on demand or at a fixed or determinable future time. Add a condition to the promise and it stops being a note. This one names the sum, the rate, the maturity date and the holder or its order on the first page.
Does a promissory note have to be witnessed?
The Act does not require a witness. What it does require is delivery to the payee, since a note is incomplete until it is delivered. A witness is added here anyway, with a block for name, address and date, because the cheapest way to answer a later argument about who signed and when is to have a third person who can say so.
Can the lender sell or transfer the note?
Yes. A note is a negotiable instrument, and AUSTRAC treats promissory notes as bearer negotiable instruments for reporting purposes. Clause 4.1 lets the holder endorse and deliver it to someone else, who then holds the same rights, and requires the maker to be told in writing before the next payment falls due so it pays the right party.
Does the face value of a note matter?
It can. ASIC's published position is that a simple promissory note with a face value of more than $50,000 is generally not a financial product, provided it carries no other significant obligations. Below that figure, or where repayment depends on how the proceeds are used in a common enterprise, a note can fall inside the disclosure and licensing rules. Worth checking before issuing one, particularly for a small note like this $45,000 example.
Why does the note tell the holder to keep the original?
Because a note is enforced by producing it. This document closes with that instruction for exactly that reason. A copy is evidence of a debt, but the original is the instrument, and a lender who has scanned and shredded it has made recovery considerably harder than it needed to be.
What happens if a payment is missed?
Clause three sets it out, covering the grace period, any default interest and whether the whole balance becomes payable. Writing the consequence into the note means the lender does not have to decide it under pressure, and the borrower knows on day one what a late payment actually triggers.
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