![]() When more formal loans are made between bigger businesses or banks, for example, that is when loan agreements are used. Promissory Notes can even sometimes be used between very small businesses. Often, Promissory Notes are used in place of more formal loan agreements when the loan is being made informally between friends or family members. In fact, Lenders don't even sign Promissory Notes - only Borrowers do. ![]() A Promissory Note is different than a loan agreement because it only binds one party - the Borrower - to actions (such as payment) or consequences (such as if the Borrower doesn't pay), but it doesn't bind the Lender to anything. A Promissory Note, also sometimes called an IOU, is essentially a one-sided document by which a borrower of money (most often just called the "Borrower") agrees to pay a lender (the "Lender"). ![]()
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