Glossary

Promissory note

A promissory note is a signed promise to pay a set amount by a set date — simpler than a full loan agreement, but a binding, enforceable debt instrument.

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Written promise to payFixed sum + date

Binding debtSimpler than a loan deed

Definition

A promissory note is an unconditional written promise, signed by the maker, to pay a defined sum to the payee on demand or at a specified time. Unlike a bill of exchange, it is a promise to pay rather than an order to pay.

In plain terms

It is a formal "I will pay you £X by [date]", signed and enforceable. Businesses use them for straightforward, documented debts.

Why it matters for your company

Promissory notes create clear, enforceable obligations — useful for inter-company loans or director’s loans. Document terms properly to avoid disputes. See loan note.