The Business Loan Promissory Note is a critical financial instrument used in Indian commercial lending transactions when a business entity borrows money from a financial institution or another entity. This document, governed by the Negotiable Instruments Act, 1881, and various RBI guidelines, serves as legal evidence of debt and contains an unconditional promise to pay. It typically includes detailed terms about the loan amount, interest rate, repayment schedule, default provisions, and any security arrangements. The document becomes particularly important in cases of default as it provides the lender with a clear legal basis for recovery. It must be properly stamped according to the Indian Stamp Act to be admissible in court and should comply with all relevant banking regulations regarding business lending.
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1. Date and Place of Execution: Specifies the date and location where the promissory note is executed, essential for determining jurisdiction and limitation period
2. Parties: Identifies the maker (borrower) and the payee (lender) with their complete legal names, addresses, and business registration details
3. Promise to Pay: Contains the unconditional promise to pay a specific sum with a defined timeline, as required by the Negotiable Instruments Act
4. Loan Amount: States the principal amount of the loan in both figures and words to avoid any ambiguity
5. Interest Rate: Specifies the rate of interest, calculation method, and frequency of interest application
6. Repayment Terms: Details the repayment schedule, including installment amounts, due dates, and payment method
7. Default Terms: Outlines the consequences of default, including penalty interest and recovery procedures
8. Representations and Warranties: Basic declarations by the borrower regarding their capacity and authority to execute the note
9. Execution: Space for signatures of the maker, witnesses, and any other required parties
1. Security Details: Required when the loan is secured by assets or collateral
2. Guarantor Provisions: Needed when a third party is guaranteeing the loan
3. Prepayment Terms: Include when early repayment is allowed, specifying any prepayment penalties or benefits
4. Insurance Requirements: Required when insurance of business assets or key person insurance is mandatory
5. Cross-Default Provisions: Include when the borrower has other loans with the same lender
6. Acceleration Clause: Optional clause allowing lender to demand full repayment under specified circumstances
7. Purpose of Loan: Include when the loan is restricted to specific business purposes
1. Schedule A - Repayment Schedule: Detailed amortization schedule showing principal and interest breakup for each installment
2. Schedule B - Security Details: Detailed description of any assets or collateral securing the loan
3. Schedule C - Draw Down Schedule: If the loan is to be disbursed in tranches, details of the disbursement schedule
4. Appendix 1 - KYC Documents: List of identity and business documents provided by the borrower
5. Appendix 2 - Business Plan: If required, summary of the business plan or project for which loan is taken
Relevant legal definitions
Clauses
Relevant Industries
Banking and Financial Services
Small and Medium Enterprises
Manufacturing
Retail
Technology
Healthcare
Real Estate
Agriculture
Infrastructure
Transportation and Logistics
Hospitality
Education
Relevant Teams
Legal
Finance
Credit
Risk Management
Compliance
Treasury
Corporate Secretarial
Business Development
Loan Operations
Documentation
Relevant Roles
Chief Financial Officer
Finance Manager
Credit Manager
Loan Officer
Legal Counsel
Corporate Lawyer
Business Development Manager
Risk Manager
Compliance Officer
Treasury Manager
Company Secretary
Managing Director
Financial Controller
Accounts Manager
Credit Risk Analyst
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