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Promissory Note Loan Agreement for Canada

Promissory Note Loan Agreement Template for Canada

A Canadian Promissory Note Loan Agreement is a legally binding document that combines a loan agreement with a promissory note, governed by both federal and provincial legislation including the Bills of Exchange Act and provincial contract laws. This document establishes the terms and conditions of a loan, including the principal amount, interest rate, repayment schedule, and default provisions, while incorporating a promissory note that serves as a negotiable instrument representing the borrower's unconditional promise to repay the loan. The agreement provides security for the lender while ensuring clarity and enforceability of the loan terms under Canadian jurisdiction.

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What is a Promissory Note Loan Agreement?

The Promissory Note Loan Agreement is commonly used in Canadian lending transactions where parties seek to combine the comprehensive terms of a loan agreement with the negotiability and enforcement benefits of a promissory note. This document is particularly useful for both institutional and private lending scenarios, providing a structured framework for loans while ensuring compliance with Canadian federal legislation (such as the Bills of Exchange Act and Interest Act) and provincial regulations. It includes essential elements such as loan amount, interest calculations, payment terms, security provisions (if any), and default remedies. The agreement is suitable for various lending situations, from business loans to personal financing, and can be adapted to include additional features such as security interests or guarantees while maintaining its enforceability under Canadian law.

What sections should be included in a Promissory Note Loan Agreement?

1. Parties: Identifies the lender and borrower with their full legal names and addresses

2. Background: Explains the context of the loan and the parties' intention to enter into this agreement

3. Definitions: Defines key terms used throughout the agreement

4. Loan Amount and Interest: Specifies the principal amount, interest rate, and how interest is calculated

5. Promissory Note Terms: Details of the promissory note including its creation, delivery, and legal effect

6. Repayment Terms: Specifies payment schedule, amounts, and method of payment

7. Prepayment Provisions: Terms regarding early repayment rights and any associated penalties or fees

8. Events of Default: Defines what constitutes default and consequences thereof

9. Remedies: Outlines the lender's rights and remedies upon default

10. Representations and Warranties: Borrower's statements regarding their legal capacity and financial condition

11. Notices: How formal communications between parties should be made

12. General Provisions: Standard clauses including governing law, amendments, and severability

What sections are optional to include in a Promissory Note Loan Agreement?

1. Security Interest: Include when the loan is secured by collateral, describing the security and registration requirements

2. Guarantor Provisions: Include when there is a guarantor for the loan, outlining their obligations and liability

3. Insurance Requirements: Include when borrower must maintain specific insurance coverage

4. Financial Covenants: Include for business loans requiring ongoing financial performance metrics

5. Cross-Default Provisions: Include when default under other agreements should trigger default under this loan

6. Assignment and Transfer: Include when either party may need to assign their rights under the agreement

7. Tax Provisions: Include when tax implications need to be specifically addressed

8. Subordination: Include when this loan needs to be subordinated to other debt or when it has priority

What schedules should be included in a Promissory Note Loan Agreement?

1. Schedule A - Promissory Note: The form of promissory note to be executed

2. Schedule B - Repayment Schedule: Detailed amortization table showing payment dates and amounts

3. Schedule C - Security Agreement: Details of any security or collateral (if applicable)

4. Schedule D - Guarantor Agreement: Form of guarantee if there are guarantors

5. Appendix 1 - Definitions: Extended definitions if too lengthy for main agreement

6. Appendix 2 - Notice Details: Detailed contact information for notices

Authors

Alex Denne

Head of Growth (Open Source Law) @ Ƶ | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Jurisdiction

Canada

Publisher

Ƶ

Document Type

Loan Agreement

Sector

Banking

Cost

Free to use
Relevant legal definitions






























Clauses






























Relevant Industries

Banking and Financial Services

Real Estate

Small Business

Corporate Finance

Private Lending

Construction

Manufacturing

Retail

Professional Services

Agriculture

Technology

Healthcare

Relevant Teams

Legal

Finance

Treasury

Credit and Risk

Compliance

Commercial Banking

Private Banking

Collections

Corporate Secretariat

Business Development

Operations

Relevant Roles

Chief Financial Officer

Finance Manager

Legal Counsel

Corporate Lawyer

Loan Officer

Credit Manager

Financial Controller

Business Development Manager

Risk Manager

Compliance Officer

Treasury Manager

Commercial Banking Officer

Private Banking Manager

Collections Manager

Corporate Secretary

Accounts Receivable Manager

Industries








Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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