In its simplest terms, a promissory note is a written promise to
repay a loan or debt under specific terms - usually at a stated
time, through a specified series of payments, or upon demand.
It is a written, dated and signed two-party instrument
containing an unconditional promise by the maker to pay a definite
sum of money to a payee on demand or at a specified future date. A
purchaser of goods or services usually issues a promissory note to
a supplier promising payment at a future date. The supplier can
come to the bank to discount the face value of the note and access
cash before the maturity of the promissory note. The purchaser will
pay the face value on maturity day to the bank.
- Suppliers can easily access funds to easy cash flow
- Purchasers can manage cash outflows by paying for supplies or
services at a future pre agreed date