Venture Promissory Note

A venture promissory note are a legally binding written document that ensures the repayment of the amount given as a loan. One type of these notes is a venture promissory note that is saleable for investment purposes.

venture promissory note

Buying a house, especially when you are lending some money to finance the house, is a hard task. It often requires a lot of paperwork, money, and agreements. On the other hand, if you are lending someone money to buy, you may be worried about the repayment of the money. In such cases, a promissory note in combination with some other documents can provide security to the lender.

In some other cases, businesses use promissory notes as well to sell these venture promissory notes to the investors. Thus, there are multiple types of promissory notes and each type is used for different situations.

What Is A Venture Promissory Note?

As the name suggests, the promissory note is a promise to pay back the money after a specific period of time. For example, if you have bought a house by lending some money from a party, a promissory note will ensure that you will pay back that amount under certain conditions after a specific period. It is important to understand this note in detail to allow buyers and lenders both to make an informed decision. Otherwise, there are chances of future clashes between the maker of the promissory note and the payee. 

A promissory note is a formal arrangement for the repayment of a loan. It is a commitment to pay, and the terms of the deal should be included.

Although a promissory note is not a contract, you may have to sign one before taking out a mortgage. They describe the borrower, the lender, and the terms of a loan agreement. They also specify the amount lent and the frequency and number of payments that must be made. Also, the promissory note must include the collateral if there is any. Another important thing to include in a promissory note is how much interest is going to be there against an installment or original price. 

These notes are more common in the case of personal loans or situations when there is the involvement of hard money loans. It is a written legal document that safeguards the right and money of the lender. It is often signed in combination with the deed of trust or mortgage to provide security to the lender. 

Elements that Should be Included in Promissory Notes

A promissory note must include some conditions and elements that make it a legal document. Otherwise, it may lack legal aspects that will make it a valid and verifiable agreement. However, the requirements that make a promissory note a legal document vary according to the states. Yet, some of the minimum things that must be mentioned in a promissory note are:

  • The name and details of the lender of the money should be present in a promissory note.
  • The name and details of the buyer must also be present in a promissory note.
  • The original amount of loan.
  • The interest rate and type of interest.
  • If there is any collateral, it must be mentioned with all the required details.
  • The schedule of repayment, which must be a mutual decision of both parties.
  • The maturity date.
  • The address of the property you are lending money for.
  • If there are any late fees, you must state that in the note as well.
  • Signature of both parties to ensure their consent.
  • Any other fees or conditions that will be followed in case of failure of repayment.
  • Any other agreed-upon terms or conditions by both parties.

These are some basic elements that must be present in a promissory note. However, in some cases, the state may require some additional things as well. Thus, it is important to contact a real estate lawyer that has a license to practice in your state to understand these terms. A realtor attorney can guide you more about all the legal aspects as per the laws of your state. 

How Does It Work?

Secured and unsecured promissory notes are the two styles of promissory notes. When a loan is secured by a valuable asset, such as an estate, it is known as a secured promissory note. A loan conditional on the ability to repay is known as an unsecured promissory note. Promissory notes are often signed in cases where the borrower is unable to lend money from traditional sources.

If the maker of the note wants to sell it to someone else, they can sell it. Thus, now, the new holder of the promissory note will receive the money from the borrower. A realtor attorney can guide in such aspects and helps in determining the real worth of the note. They can advise whether it is a good decision to invest in promissory notes or not. If a business sells the promissory note and makes cash after selling them, such types of notes may be called venture promissory notes. These venture promissory notes are negotiable and may be used for selling further or for investment purposes.

The repayment schedule of the loan is decided beforehand after the consent of both parties. But also, the type of repayment can be specified as well. Some of the repayment types are:

  • The buyer may have to pay in installments after with some additional amount like interest or other conditions specified.
  • Payments in installments with a balloon payment at the end.
  • Loans between friends or families may be due on demand, and there might not be specific conditions involved. 
  • Paying back on a specific date with the original amount as well as any additional amount involved,, such as interest. 

Examples of Promissory Notes

Promissory notes come in many shapes and sizes. Their differences vary as per the form of loan and the terms of the note:


These notes are more formal and go through the terms of the loan in greater detail.


A business may raise money by selling a promissory note to other investors. Only experienced investors with the necessary capital can take on the risks associated with these notes. These are called venture promissory notes. In some cases, if a business fails to pay back the money to the investor, venture promissory notes allow them to take over a certain percentage of ownership of the business. 


One of the family members or friends may send this note to another in a casual manner or as a reminder of the loan.


This promissory note is part of a home loan or other real estate transaction. It may be used in combination with some other documents. Hence, such documents as a deed of trust or mortgage provide security to the lender of the money. 

Student Loan 

These are the promissory notes when the government gives loans to the students for educational purposes. The document binds the students to return the loan after completing their education.  

Mortgages vs. Promissory Notes

A loan is more specific and details the consequences if the borrower does not make their payments. The lender gets to keep the promissory note until the second party pays off the loan. Later, the lender may return the note to the borrower or the person who paid the loan.

The promissory note sets out the borrower’s payment schedule, while the mortgage lays out what happens if the borrower defaults. The lender, for example, would almost certainly be able to foreclose on the land.

You may have to register a mortgage in public records. On the other hand, the majority of promissory notes are not in public records. 

Venture Promissory Note Attorney Near Me

Promissory notes are legal documents that are present in writing. They ensure that both parties follow the terms of the promissory note until the borrower pays the loan. Thus, one of the parties may face the consequences if they fail to comply with the conditions set by mutual decisions. For example, if a person borrows money to buy a home, and fails to pay back the amount, they can lose the home to foreclosure. In the same way, the lender may take you to the court, may ask you to pay the debt in some other way, or take other legal actions. 

It is important to take the legal advice of a realtor attorney beforehand to avoid any consequences later. For that, you can contact our expert real estate lawyers. Attorneys Real Estate Group ensures that you get the best solution for your problem. Our local attorneys have extensive real estate experience and have worked with our clients in all areas. We strive to provide the best possible service to our clients by considering their objectives and conducting a thorough and objective analysis of the most efficient means of achieving them.

Contact Attorneys Real Estate Group on our website or by phone at 916-671-3138; we look forward to assisting you.