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Who makes the payment promise in a promissory note?
Promissory Note
Learn the difference between a promise to pay and an order to pay.
Simple meaning
A promissory note is a written promise by the maker to pay a stated amount according to its terms, subject to applicable law.
Maker and payee
The maker promises payment. The payee or holder is entitled to receive payment according to the note and applicable law.
Trade-finance use
Promissory notes can represent future payment obligations and may be financed or forfaited when a financier accepts the risk and documentation.
Guarantee or aval
In some jurisdictions and structures, another party or bank may guarantee a bill or note, sometimes through an aval. This is a separate credit enhancement and is highly jurisdiction-specific.
Remember thisBill of exchange orders another party to pay; promissory note contains the maker’s own promise to pay.
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