New York Promissory Note
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A New York Promissory Note is a lot like an IOU, but wearing its best suit. It's a huddle between two parties—one borrows money from the other and makes a solemn promise to repay. It paints a clear picture of all the must-knows, like when payments should roll in and the interest tab.
What is the Usury Rate for New York?
In a nutshell, a usury rate is the highest legal interest allowed on a loan. If a lender goes above and beyond this rate, they're stepping into "usury" territory—that's a big no-no in the legal world. These rates love to dance around depending on the state, so knowing what's cool in your location is vital. Being in the know about usury rates helps you borrow like a boss, sidestepping any risky business. So, if you're thinking of getting a loan for your venture, having this magic number handy is a smart move.
For New York, the legal rate of interest is 6%, and the general usury limit is 11.25%. The maximum rate of interest chargeable in New York, with exceptions, is 16% per year. (N.Y. Gen. Oblig. § 5-501 and N.Y. Banking § 14-A)
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Read on to learn more about New York Promissory Notes, including:
What's included in a New York Promissory Note?
Here are some key components that are typically included in a New York Promissory Note:
- Amount and Terms of the Loan
- Closing and Delivery
- Representations, Warranties the Company
- Organization, Good Standing and Qualification
- Corporate Power
- Authorization
- Compliance with Laws
- Use of Proceeds
1. Amount and Terms of the Loan
"The Loan" shines a spotlight on the exact cash you're lending to the company. This piece is crucial, as it's your guardrail, ensuring both sides have a crystal-clear view. Completing the provision? Easy peasy—just scribble in your loan amount in the blank spot. And don't overlook "Exhibit A"— that's your promissory note, serving as a written pledge and proof of the loan.
In a nutshell—this star clause underscores the dough you're pitching in, setting a rock-solid base for your promissory note pact.
The Loan. Subject to the terms of this Agreement, Purchaser agrees to lend to the Company at the Closing $_________ (“Loan Amount”) against the issuance and delivery by the Company of a promissory note for such amount, attached as EXHIBIT A (“Note”).
2. Closing and Delivery
The CLOSING AND DELIVERY clause maps out the grand finale of your promissory note agreement. Within Closing, you spotlight when the deal wraps up. This date is a team decision—not required to be the birth date of the contract.
Delivery unravels the exchange playbook: the borrower passes the loan sum to the company and, in a neat little trade, the company gifts them the polished promissory note, jotting down the borrower's responsibility to repay. This two-way trade paves a clear path and hammers home commitment from everyone onboard.
CLOSING AND DELIVERY
Closing. The closing of the sale and purchase of the Notes (the “Closing”) will be held on the Effective Date, or at such other time as the Company and Purchasers may mutually agree (such date is referred to as the “Closing Date”).
Delivery. At the Closing (i) Purchaser will deliver to the Company a check or wire transfer funds in the amount of the Loan Amount; and (ii) the Company will issue and deliver to Purchaser a Note in favor of Purchaser payable in the principal amount of Purchaser’s Loan Amount.
3. Representation, Warranties The Company
This part embraces the company's honest chat about pivotal specifics. They've got to keep it on the level legally here to sidestep potential law hurdles. Slip in fitting details about the company's money story, how they operate, or any legal nuggets. It's essential for fostering trust and keeping things bright and visible in your pact.
a. Organization, Good Standing and Qualification
The Organization, Good Standing and Qualification slice gives a thumbs-up to the company's legal standing. Slip in the state where the biz is hatched, guaranteeing it runs like clockwork and builds trust among everyone involved.
Organization, Good Standing and Qualification. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of [State]. The Company has the requisite corporate power to own and operate its properties and assets and to carry on its business as now conducted and as proposed to be conducted. The Company is duly qualified and is authorized to do business and is in good standing as a foreign corporation in all jurisdictions in which the nature of its activities and of its properties (both owned and leased) makes such qualification necessary, except for those jurisdictions in which failure to do so would not have a material adverse effect on the Company or its business.
b. Corporate Power
The Corporate Power bit nods to the company's legal green light to roll out this agreement and meet obligations. It basically says, "Yeah, our company's on the legal up-and-up for this deal." It's key for crafting trust and showing you're all playing by the rules. So, make sure this piece is in there and crystal clear.
Corporate Power. The Company has all requisite corporate power to execute and deliver this Agreement, to issue the Note and to carry out and perform its obligations under the terms of the Note.
c. Authorization
The Authorization bit double-checks the company's key player thumbs-up and the note's kosher status. It's a must-have chunk of your contract that confirms every required biz move has been made. This section acts as a safeguard for both sides and lays a concrete base for your agreement.
Authorization. All corporate action has been taken on the part of the Company, its directors and its stockholders necessary for the authorization of the Note and the execution, delivery and performance of all obligations of the Company under the Note. The Note, when executed and delivered by the Company, will constitute valid and binding obligations of the Company enforceable in accordance with its terms, subject to laws of general application relating to bankruptcy, insolvency, the relief of debtors.
d. Compliance with Laws
The Compliance with Laws snippet assures that your enterprise isn't consciously bending any rules that could bruise its operation. Tucking in this clause provides a comfort blanket for all involved, emphasizing your company's dedication to playing by the legal book.
Compliance with Laws. To its knowledge, the Company is not in violation of any applicable statute, rule, regulation, order or restriction of any domestic or foreign government or any instrumentality or agency in respect of the conduct of its business or the ownership of its properties, which violation would materially and adversely affect the business, assets, liabilities, financial condition or operations of the Company.
e. Use of Proceeds
The Use of Proceeds segment clearly states the loan is strictly for trade matters, not private ones. It's key to keeping everything openly visible and holding on to trust with your financers.
Use of Proceeds. The Company will use the proceeds of the Note for the operations of its business, and not for any personal, family or household purpose.
Can a promissory note be used without a mortgage?
Absolutely, a promissory note can fly solo without a mortgage. Picture a promissory note as a law-anchored doc that spells out loan details, whereas a mortgage tags the loan to some big-ticket item, like a property. Promissory notes can navigate both secured and unsecured loans, which means you can own a promissory note without a mortgage—that would be your unsecured loan. But brace yourself, you generally can't have a mortgage without a promissory note, as it lays down how you'll pay back and seals your promise to return the loan.
How do you collect from a promissory note?
To reel in moolah from a promissory note, add up the full amount due, taking into account interest and additional costs. Drop a line in writing to the borrower. If they're not coughing up, legal action might be on the cards. Make sure you've gathered all the necessary paperwork and scout for legal advice since different areas have unique laws. Steer clear of hounding the borrower as it could be offside legally. It's always smart to have a chat with a lawyer to sidestep any potential snags.