The Promissory Note With Personal Guarantee is a crucial financial instrument used when a lender requires additional security beyond the borrower's primary promise to pay. This document is particularly relevant in situations where the borrower's creditworthiness alone may not satisfy the lender's risk requirements, necessitating a third-party guarantee. Governed by Canadian federal legislation (primarily the Bills of Exchange Act) and provincial laws, it creates two layers of payment obligation: the primary obligation of the borrower and the secondary obligation of the guarantor. The document is commonly used in business loans, private lending arrangements, and commercial transactions where personal guarantees from directors, shareholders, or related parties are required to secure funding. It includes detailed payment terms, interest provisions, default clauses, and specific guarantee obligations, providing clear enforcement mechanisms for the lender.
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1. Parties: Identifies the Lender (Payee), Borrower (Maker), and Guarantor(s)
2. Promise to Pay: States the principal amount, currency, and unconditional promise to pay
3. Payment Terms: Specifies payment amount, frequency, due dates, and maturity date
4. Interest: Details the interest rate, calculation method, and payment schedule
5. Place of Payment: Specifies where and how payments are to be made
6. Prepayment: Terms regarding early payment options and any associated penalties
7. Events of Default: Defines circumstances constituting default and consequences
8. Personal Guarantee: Terms of the guarantee, including guarantor's obligations and extent of liability
9. Waiver and Consent: Standard waivers and consents from both borrower and guarantor
10. Notice: Requirements for giving notice between parties
11. Governing Law: Specifies applicable jurisdiction and governing law
12. Signatures: Execution blocks for all parties with witness requirements
1. Security Interest: Include when the note is secured by specific assets or collateral
2. Late Charges: Include when there are specific penalties for late payments
3. Collection Costs: Include when the borrower is responsible for collection costs and legal fees
4. Joint and Several Liability: Include when there are multiple borrowers or guarantors
5. Acceleration Clause: Include when lender wants right to demand full payment upon default
6. Assignment: Include when the note may be assigned or transferred
7. Subordination: Include when the note needs to be subordinated to other debt
8. Post-Dated Checks: Include when payments will be made by post-dated checks
1. Payment Schedule: Detailed amortization table showing payment dates and amounts
2. Security Description: Detailed description of any assets securing the note
3. Guarantor Financial Statement: Current financial statement of the guarantor(s)
4. Additional Guarantor Information: Any additional information or terms specific to the guarantee
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Finance Director
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