What is promissory note in business
Promissory note is a promise by one party accepting paying certain amount to another party either immediately or at future set date.
Example:The company may have supplied goods and services on credit to certain organization's and a time comes when the company is in need of finance and the organization's had not yet paid for the goods and services delivered to them.So the company can write note to the organization's to pay the company's bank the value amount of goods and services delivered to them.Once the organization's accepts the note by signing,then the company takes the note to it's bank or any financial institution which will accept the promissory note to give finance to the company based on amount written on the promissory note less discount.
When promissory note matures,the bank will inform the organization's to pay the amount specified at the promissory note.When the organization's fails to pay,the bank still can instruct the company to pay.
Here the company is lender while organization is debtor.
Example:The company may have supplied goods and services on credit to certain organization's and a time comes when the company is in need of finance and the organization's had not yet paid for the goods and services delivered to them.So the company can write note to the organization's to pay the company's bank the value amount of goods and services delivered to them.Once the organization's accepts the note by signing,then the company takes the note to it's bank or any financial institution which will accept the promissory note to give finance to the company based on amount written on the promissory note less discount.
When promissory note matures,the bank will inform the organization's to pay the amount specified at the promissory note.When the organization's fails to pay,the bank still can instruct the company to pay.
Here the company is lender while organization is debtor.
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