Commercial Promissory Note Law and Legal Definition

Commercial promissory notes are an instrument that evidences the specific terms agreed between the borrower and lender. In case of a failure by the borrower to repay the loan amount the commercial lender will legally assign a lien on any assets of the borrower. Therefore, where a borrower defaults on a commercial promissory note, the lender need not have to wait to receive her/her money in installments, but can demand full payment immediately. For instance, if the loan amount is $5,000 and the borrower defaults in making installment payments, then the signed commercial promissory note will give the lender the power to demand the entire balance. However, a simple commercial promissory note between a borrower and lender is not a security.

In Louisville Banking Co. v. Gray, 123 Ala. 251 (Ala. 1898), the court observed that “The only difference between the ordinary promissory note and the commercial promissory note is that a commercial promissory note must have a designated place of payment named in it.”