Most every Cincinnati business that offers a service or product has to enter into a contract at some point. Many Ohio companies draft these agreements to make sure that they get repaid for the inventory, equipment or service that they’re about to lend out or perform. Two of the primary documents that every company should have their customers sign are a promissory note and a security agreement. Businesses often draft promissory notes when they’re extending a loan to a customer. This legally-binding financial document can either be secured or unsecured. A secured promissory note is what a business drafts when they’re requiring a customer to put up collateral to receive a loan from them. In this instance, a company may offer up their accounts receivable, inventory or business equipment as collateral to be able to borrow from you. If you aren’t requiring your customer to put up collateral to borrow from you, then you generally only need to have them sign an unsecured promissory note. The downside to entering into one of these with a customer is that if they default on the loan, then the only recourse you generally have available to you to pursue to recover what you’re owed is a lawsuit. A secured promissory note is almost always accompanied by a security agreement. The former generally contains a brief description of the collateral that the borrower has put up to secure the loan. The secured promissory note often advises the security reviewer to consult the security agreement for additional details about the transaction. Security agreements go into more detail about what type of business assets were turned over as collateral for the loan. This legally-binding document also describes what happens if a borrower defaults once the repayment period has begun. Security agreements are often written to allow lenders to demand that borrowers turn over collateral to them. They may also be written to permit businesses to take such items by force themselves. Verbal agreements are virtually obsolete. An increasing number of companies have tried to steer clear of extending unsecured loans in recent years too due to limited enforceability concerns. An attorney can help you and your Cincinnati business draft a promissory note and security agreement that will protect your Ohio company’s best interests so that you don’t end up with the short end of the stick.
The 2 primary documents you should have borrowers sign
On Behalf of Lindhorst & Dreidame Co., L.P.A. | Apr 7, 2020 | Business Contracts and Leases
Recent Posts
Archives
- January 2022
- November 2020
- September 2020
- August 2020
- July 2020
- June 2020
- May 2020
- April 2020
- March 2020
- February 2020
- January 2020
- December 2019
- November 2019
- October 2019
- September 2019
- August 2019
- July 2019
- June 2019
- May 2019
- April 2019
- March 2019
- February 2019
- January 2019
- December 2018
- November 2018
- October 2018
- September 2018
- August 2018
- July 2018
- June 2018
- May 2018
- April 2018
- March 2018
- February 2018
- January 2018
- December 2017
- November 2017
- October 2017
- September 2017
- August 2017
- July 2017
- June 2017
- May 2017
- April 2017
- March 2017
- February 2017
- January 2017
- December 2016
- November 2016
- October 2016