A promissory note is a written, legally binding promise by a borrower to repay a specific sum to a lender under stated terms, interest rate, payment schedule, and maturity date. It is the core document that makes seller financing enforceable.
Worked example
| Term | Detail |
|---|---|
| Principal | $150,000 |
| Interest rate | 6.0% |
| Amortization | 10 years |
| Standby period (no payments) | 24 months |
| Approx. payment after standby | ~$1,665/mo |
Every one of these terms is spelled out in the note so both sides know exactly what is owed and when.
Why it matters when buying a business
In an SBA deal, the seller note is documented as a promissory note and is usually placed on standby and subordinated to the bank. Read every clause, default triggers, acceleration, and personal guarantee language decide what happens if the business stumbles.
