Startup Funding Espresso -- Promissory Notes

Hello, this is Hall T. Martin with the Startup Funding Espresso -- your daily shot of startup funding and investing.

For family and friends funding, sometimes a promissory note is used to set up a loan.

Here are some key points to consider in reading a promissory note:

1. The note summary section establishes the relationship between the borrower and the lender, the date of the note, the total loan amount, and the agreed-upon interest rate. 
2. The terms of repayment section defines how the loan will be repaid.
3. The late fee options typically include a late fee penalty. This clause documents either a fixed amount, such as $100 in addition to the current payment due, or a percentage of the payment due such as 1% per week.
4. The prepayment option may help the lender as well as the startup. For example, follow-on accredited investors might prefer a loan to be paid off prior to closing their investment deal.
5. Family and friend loans are intended to be more supportive, so you may choose language that allows time to “remedy” the default within X number of days or weeks. 
   

Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding.

Let’s go startup something today.
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