What is a Loan Note?

What is a loan note?

A loan note is an extended form of a generic I Owe You (IOU) document from one party to another. It enables a payee (borrower) to receive payments from a lender, possibly with an interest rate attached, over a set period of time and ending on the date at which the entire loan is to be repaid. Loan notes are usually provided in lieu of cash at the payee’s request.

A loan note denotes a type of contract that typically outlines the legal obligations of the lender and the borrower. A proper loan note will include a set of contractual penalties, including the right to sue or seek arbitration, if either party to the contract fails to meet or otherwise defaults on financial obligations. 

 

SOURCE: INVESTOPEDIA – Alan Farley Apr 14, 2019

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