Ensuring that a promissory note is saleable has solid advantages for the lender.
A saleable promissory note, otherwise called a negotiable promissory note, is a great way to lend money since it allows the lender to sell the debt to another party whenever he chooses, ideally for a profit. There are four key requirements in preparing the note so that it is on a sound legal footing as per the governing Article 3 legal statute of Uniform Commercial Code (UCC).
Instructions
1. Put it in writing. An oral agreement has no value to a debt buyer. Once the agreement goes into writing it moves into the legal sphere and is now an asset. Additionally, clearly specify in the written note the details of the agreement so all parties are clear on their respective obligations. Both parties must sign the agreement.
2. Include an unconditional promise to pay a specific amount of money. This will fix the value of the note. It is very important that no other clause in the note negates the unconditional promise to pay.
3. Include the statement that the loan is either payable "on demand" or by a specific date. The timing is important since without it the borrower is under no obligation to pay back the loan.
4. Without the four legal requirements to make it saleable, a lender can not sell the debt.
Make sure to write that the note is payable either "to order" or "to bearer." This allows for the person to whom the note is sold to have the legal ability to collect the debt from the borrower. Without this the borrower would have a strong legal case to say that he has no contract with the new buyer and therefore there is no debt.
