Like the bill of exchange , the promissory note is part of IOUs and more specifically of the category of commercial paper . This financial document therefore represents a means of commercial payment, generally used by small and medium-sized enterprises, craftsmen or traders.
Concretely, it is a writing written by the subscriber (drawer or debtor) who undertakes to pay the drawee, ie the beneficiary, a predefined amount and on a date set upstream. Please note: a promissory note cannot have an expiry date of more than three months.
The promissory note differs from the bill of exchange in one aspect, here it is the subscriber who assumes responsibility for the payment and who undertakes to honor it. Also, it can be produced in two distinct formats: either paper or dematerialized in the form of a statement written on a magnetic strip.
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Promissory note and BOR: what’s the difference?
The BOR or promissory note raised is a dematerialized note . It is more precisely a computer file, in a format defined with the bank and teletransmitted between the subscriber and his bank.
Good to know: The raised promissory note (BOR) and the raised bill of exchange (LCR) are generic names assigned to respectively qualify the promissory note and the bill of exchange, exchanged in the form of a computer record.
The different types of promissory note
There are several forms of promissory note:
- Informal or personal : in this context the promissory note can be used between members of the same family.
- Commercial : in the context of a commercial relationship, they are based on a certain formalism with the related specific conditions.
- Investment : a company can issue this type of financial document for raising capital for example, which can also be sold to other investors.
Another significant interest in relation to the bill of exchange, since the promissory note is written as a promise by the debtor to settle an amount on a named date, the creditor who endorses the note therefore does not have to guarantee or guarantee. wondering about the debtor’s acceptance, since it is the distributed title that guarantees the debtor’s acceptance.
An endorsement of a promissory note can be made for the benefit of the drawer as to cancel his own debt, but also of the drawee or a third party. In the event that the drawee wishes in return to transmit a promissory note, the holder must re-sign the document, but this time as an endorser, before returning it to an endorser.