Texas Promissory Note
Last Updated:
A Texas Promissory Note is like an IOU, but with a touch of formality. It's a friendly understanding between two parties, where one lends money to the other, who commits to pay it back. It neatly lays out critical info, like when payments are due and how much interest is involved.
What is the Usury Rate for Texas?
In simple terms, a usury rate is like a speed limit for the interest on a loan — it's the highest legal interest rate that can be tacked onto a loan. If a lender tries to speed and charges beyond this limit, it's called "usury," and that's against the law. The speed limits differ from state to state, so it's a good idea to familiarize yourself with the rules in your local neighborhood. Getting familiar with the usury rate is like buckling your seatbelt when you borrow— it helps you borrow wisely and dodge risky potholes on your business journey. So, if you're thinking about a business loan, it's really handy to keep this number on your dashboard.
For Texas, the parties may agree in writing to a maximum rate up to the weekly ceiling as published in the Texas Credit Letter. If no agreement exists, then the maximum is 10%. (Tex. Fin. Code Ann. § 302.001(b) and Tex. Fin. Code Ann. §303.002)
Thank you for downloading!
How would you rate your free form?
Read on to learn more about Texas Promissory Notes, including:
What's included in a Texas Promissory Note?
Here are some key components that are typically included in a Texas 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" section crystallizes the precise sum of cash you're extending to the company. This part holds significance because it brings about transparency and shields both parties involved. To wrap up this provision, you need to do nothing more than plug in the loan figure into the allotted blank space. It's worth paying attention to "Exhibit A" too, where the promissory note steps in as the penned pledge and proof of your loan.
In a nutshell—this crucial clause spotlights the funds you're investing, anchoring a solid base for your promissory note understanding.
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 part outlines the endgame of your promissory note agreement. In the Closing bit, you'll earmark when the deal seals. This day can be a common pick; it doesn't have to be the contract's birthdate.
Delivery breaks down the give-and-take mechanics: the lender sends over the loan stash to the company while the company reciprocates by handing them a complete promissory note, pressing into ink the lender's duty to pay back. This two-way transfer nurtures openness and dedication among all players involved.
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
In this part, the company spills the beans on essential facts, vouching for their honesty. They're legally tied to being truthful to sidestep any legal hiccups. Toss in significant tidbits about the company's finances, day-to-day activities, or legal affairs. Trust and transparency are cornerstones for a rock-solid agreement between buddies.
a. Organization, Good Standing and Qualification
The section called Organization, Good Standing and Qualification verifies the legal existence of the company. Jot down the state where your venture was born and operates from, assuring that it can run without a hitch and foster faith between all those 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 part affirms the company's judicial capacity to carry out this deal and meet obligations. It basically says: "We, as a company, are legally allowed to make this deal happen." It's key for building a bridge of trust and maintaining legal correctness. Hence, take care that this clause is incorporated 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 part guarantees the company's green light from stakeholders and the note's legal status. It plays a crucial role in your agreement by double-checking if all needed corporate steps have been marched. This provision acts as a safety net for everyone involved and lays down a strong basis for your arrangement.
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 segment affirms that your business isn't intentionally stepping on any legal landmines that could wreck your operations. Having this clause in your contract gives everyone a comfort blanket, signifying your enterprise's promise to play by the legal rulebook.
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 chunk underscores that the loan is strictly for company dealings, not personal whims. It's key for shining a light on your business intentions and keeping the faith of those lending you the moolah.
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. Think of a promissory note as a legally tied promise detailing your loan's playbook, while a mortgage serves as a safety net tying the loan to something tangible like property. Promissory notes can come in two flavors: backed by collateral (secured) or backed by nothing but trust (unsecured). Hence, you can have a promissory note without a mortgage, a.k.a. an unsecured loan. But here's the catch - you typically can't have a mortgage without a promissory note, since the note sketches out how to pay back the loan and holds the borrower's signed promise to return the dough.
How do you collect from a promissory note?
To reel in the amount from a promissory note, tally up everything owed, including the tasty interest and extra charges. Write a friendly note to the person who owes you. If they keep their wallet shut, ponder stepping into the legal arena. Make sure you've gathered all the paper trail and meet with a legal expert since every area dances to its own legal tunes. Don't badger the person who needs to pay up because it might cross a legal line. Always have a chat with a legal advisor to sidestep any stumble.