Promissory notes
A promissory note is the written promise to repay. Here is what sits inside one, which clauses change your risk, and how an existing note reads when you ask for new money.
✓ Checking what you qualify for does not affect your credit score.
Updated October 13, 2026 · Merchant Fund Express
A promissory note is a signed promise by a borrower to pay a stated sum to a lender, on stated terms. In business lending it is the document that turns a handshake into a debt: it names the principal, the interest or fee, the payment schedule, what counts as a default and what the lender can do about it. A term loan almost always has one. A merchant cash advance usually does not, because an advance is written as a purchase of future receivables rather than a loan, which is why the paperwork for the two looks so different.
| Clause | What to check |
|---|---|
| Principal | The amount borrowed. Check it against the net cash you actually receive after fees. |
| Interest and fees | The rate, how it accrues (simple or amortizing) and any origination or closing charge. |
| Payment schedule | Amount, frequency and the first and last payment dates. |
| Maturity | The date the full balance is due. A balloon note leaves a large final payment. |
| Prepayment terms | Whether paying early saves interest, costs a penalty, or changes nothing. |
| Default and acceleration | What triggers default and whether the lender can demand the whole balance at once. |
| Security and guarantee | Whether the note is backed by collateral, a UCC filing or a personal guarantee. |
Secured notes point to a separate security agreement, and a personal guarantee is often its own signed page. Read all three together, because the note alone does not tell you what can be collected if things go wrong.
Take a $40,000 note at a simple 12% annual rate, repaid monthly over 12 months on an amortizing schedule, with a 2% origination fee withheld at closing.
| Item | Amount |
|---|---|
| Principal on the note | $40,000 |
| Origination fee withheld (2%) | $800 |
| Net cash received | $39,200 |
| Monthly payment (12 months, 12% amortizing) | About $3,554 |
| Total of 12 payments | About $42,648 |
| Total cost versus net cash | About $3,448 |
| First payment date | 30 days after funding, then the same day each month |
The number most owners skip is the gap between the principal on the note and the cash that lands in the account. The note says $40,000. The bank account says $39,200. Every cost comparison should start from the second number.
All figures in worked examples are illustrations of the arithmetic, not offers or quotes. Real terms depend on your file and the funder.
None of these makes a note bad on its own. They make it a note you should read twice, and price against offers that do not carry them.
When you apply, every signed note you are still paying shows up somewhere in your file: as a fixed monthly debit on your bank statements, and often as a UCC filing. A reviewer reads those payments against your deposits. A $3,554 monthly note payment on $45,000 of monthly deposits is easy to carry. The same payment on $18,000 of deposits changes what can sensibly be added on top.
List each note on your application with the lender, the balance, the payment and the maturity date. If a note is close to maturity, say so; a debt that ends in two months reads very differently from one with three years left. Our published requirements limit how many existing positions a file can carry, and a term loan on the new side must sit in first position, so an open note can decide which product fits.
If your revenue swings hard week to week, a fixed note payment can bite in a slow month. A revenue-based product ties remittance to sales instead. If you have strong, steady revenue and three or more years in business, a note-based term loan is usually the lower-cost route. If you are unsure which side your file falls on, the qualification check does not touch your credit, and you can apply in about five minutes when you are ready.
Yes. A properly signed note is an enforceable promise to pay on the stated terms, and it is the main document a lender relies on to collect.
Usually not. An advance is typically written as a purchase of future receivables, not a loan, so the contract is a purchase agreement with remittance terms rather than a note.
A secured note is backed by collateral named in a security agreement. An unsecured note relies on the borrower, and often on a personal guarantee.
Yes. It shows up on your bank statements as a recurring debit regardless. Disclosing the balance and maturity up front lets a reviewer read it correctly instead of guessing.
Same-day decision. Applying takes a few minutes and will not affect your credit score.
