Promissory note

A promissory note is a written agreement under which one party agrees to pay another party a certain amount of cash on a future date. The date may be a fixed date sometime in the future, or on demand. The note typically contains the following information:

  • Name of the payee
  • Name of the maker (payer)
  • The sum to be paid
  • The interest rate that applies to the debt
  • The maturity date
  • The signature of the issuer and the date signed

The payee is the holder of a promissory note. Once the underlying funds have been paid to the payee, the payee cancels the note and returns it to the maker.

A promissory note differs from an IOU in that the note states the specifics of repayment, while an IOU only acknowledges that a debt exists.

Related Courses

Corporate Finance 
Treasurer's Guidebook