Loan & Promissory Note Templates
Loan notes and promissory notes are both financial instruments that evidence debt. They provide a simple way of acknowledging a debt and are legally binding contracts.
They are particularly suited to loans which are short term in nature and for charities or clubs looking to raise small amounts from its member or supporter base.
Both loan notes and promissory notes are more than simple IOUs, because as well as stating the amount(s) owed, they state the necessary steps to pay back the debt. Loan notes are similar to promissory notes; however significantly only promissory notes are negotiable instruments, meaning that the right to be paid under the note can be freely transferred.
These documents are designed for:
- charities whose legal form is an unincorporated association, company limited by guarantee or CIO; or
- private members’ clubs whose legal form is an unincorporated association or company limited by guarantee.
There are five template documents in this subfolder. One is a short form of Loan Note, and four are forms of Promissory Note.
A Loan Note is on the whole a more sophisticated financing arrangement than a promissory note. The lender (note holder) effectively buys a loan note from the borrower (issuer of the note) in exchange for the borrower’s obligation to pay for the notes in the future in accordance with the terms and conditions of the loan. The loan note is executed as a deed.
The short form of Loan Note in this subfolder is suitable for borrowing on an ordinary commercial basis where interest on the loan is to be payable and there will be a substantial number of lenders (e.g. the membership or supporter base of a charity or club). It can be used by:
- a charity borrowing from any of its board of trustees/directors;
- a club borrowing from any of its directors; or
- a charity or a club borrowing from any members or supporters, private individuals, banks or other organisations.
A long form Loan Note is included in the Corporate folder where larger sums are to be borrowed from a number of people or organisations and the arrangements need to be more sophisticated.
Loan Notes can only be used by a corporate body; they cannot be used by any charity or club which is an unincorporated association.
A Promissory Note consists of a written, dated and signed unconditional promise by the maker to pay a definite sum of money to a payee on demand, or at a specified future date. The note can provide for interest to be payable on the debt. A promissory note is only signed by the promisor (maker), and not by the payee (the lender).
A promissory note is freely transferable (hence the promise to pay is unconditional).
In the case of promissory notes, the law presumes (contrary to the usual rules of contract) that consideration is provided. Thus it is not necessary to execute a promissory note as a deed.
As regards charities and clubs, promissory notes will be suitable for borrowing small amounts from one or relatively few individuals, for example, a charity’s or club’s trustees, directors, committee members, ordinary members or supporters (with or without interest) but they may also be used to borrow from other individuals or organisations. Lenders who are trustees, directors, members, or supporters of a charity or club might be content to be repaid short term loans without interest.
Promissory Notes may be used by charities or clubs set up in either corporate or unincorporated form.
There is a form of Promissory Note in this subfolder which is suitable where the borrower is a CIO or company limited by guarantee, and there is another form of Promissory Note where it is an unincorporated association. There is a “no interest payable” version and an “interest payable” version of each of these.
These Charities & Non-Profit Documents are part of the Corporate Documents Folder. Just £35.00 + VAT will provide you with 1 year's unlimited access to download all/any documents from the Corporate Folder.