For value received, the undersigned (the "Borrower") promises to pay to the order of (the "Holder"), in the manner and at the place provided below, the principal sum of $ on demand, but in any event no later than .


All payments of principal and interest under this note will be made in lawful money of the United States, without offset, deduction, or counterclaim, by wire transfer of immediately available funds to an account designated by the Holder in writing at least days after the effective date of this note or, if this designation is not made, by check mailed to the Holder at , , , , or at such other place as the Holder may designate in writing.


Interest on the unpaid principal balance of this note is payable from the date of this note until this note is paid in full, at the rate of % per year, or the maximum amount allowed by applicable law, whichever is less. Accrued interest will be computed on the basis of a 365-day or 366-day year, as the case may be, based on the actual number of days elapsed in the period in which it accrues.


The Borrower may prepay this note, in whole or in part, at any time before maturity without penalty or premium. Any partial prepayment will be credited first to accrued interest, then to principal. No prepayment extends or postpones the maturity date of this note.


This note is secured by certain assets of the Borrower in accordance with a separate security agreement dated  between the Holder and the Borrower (the "Security Agreement"). If an Event of Default (defined below) occurs, the Holder will have the rights set forth below and in the Security Agreement.


Each of the following constitutes an "Event of Default" under this note: 

  • (a) the Borrower's failure to make any payment in full of any amount to the Holder by the  business day following the date of the Holder's demand for payment, including any payments due under this note at its maturity;
  • (b) the filing of any voluntary or involuntary petition in bankruptcy by or regarding the Borrower or the initiation of any proceeding under bankruptcy or insolvency laws against the Borrower;
  • (c) an assignment made by the Borrower for the benefit of creditors; or
  • (d) the appointment of a receiver, custodian, trustee, or similar party to take possession of the Borrower's assets or property.; or
  • (e) the death of the Borrower.


If any Event of Default occurs, all principal and other amounts owed under this note will become immediately due and payable without any action by the Holder, the Borrower, or any other person. The Holder, in addition to any rights and remedies available to the Holder under this note, may, in its sole discretion, pursue any legal or equitable remedies available to it under applicable law or in equity, including taking any of the following actions:

  • (a) personally, or by agents or attorneys (in compliance with applicable law), take immediate possession of the collateral.To that end, the Holder may pursue the collateral where it may be found, and enter the Borrower's premises, with or without notice, demand, process of law, or legal procedure if this can be done without breach of the peace. If the premises on which any part of the collateral is located are not under the Borrower's direct control, the Borrower will exercise its best efforts to ensure that the Holder is promptly provided right of access to those premises. To the extent that the Borrower's consent would otherwise be required before a right of access could be granted, the Borrower hereby irrevocably grants that consent;
  • (b) require the Borrower to assemble the collateral and make it available to the Holder at a place to be designated by the Holder that is reasonably convenient to both parties (it being acknowledged that the Borrower's premises are reasonably convenient to the Borrower);
  • (c) sell, lease, or dispose of the collateral or any part of it in any manner permitted by applicable law or by contract; and
  • (d) exercise all rights and remedies of a secured party under applicable law.


The Borrower hereby waives presentment, demand, notice of dishonor, notice of default or delinquency, notice of protest and nonpayment, notice of costs, expenses or losses and interest on those, notice of interest on interest and late charges, and diligence in taking any action to collect any sums owing under this note, including (to the extent permitted by law) waiving the pleading of any statute of limitations as a defense to any demand against the undersigned. Acceptance by the Holder or any other holder of this note of any payment differing from the designated lump-sum payment listed above does not relieve the undersigned of the obligation to honor the requirements of this note.


  • (a) Choice of Law. The laws of the state of govern this note (without giving effect to its conflicts of law principles).
  • (b) Choice of Forum. Both parties consent to the personal jurisdiction of the state and federal courts in , .


The Borrower shall pay all costs and expenses of the collection of indebtedness evidenced by this note, including reasonable attorneys' fees and court costs in addition to other amounts due, without protest.


  • (a) No Assignment. The Borrower may not assign any of its rights under this note. All voluntary assignments of rights are limited by this subsection.
  • (b) No Delegation. The Borrower may not delegate any performance under this note.
  • (c) Enforceability of an Assignment or Delegation. If a purported assignment or purported delegation is made in violation of this section, it is void.


If any one or more of the provisions contained in this note is, for any reason, held to be invalid, illegal, or unenforceable in any respect, that invalidity, illegality, or unenforceability will not affect any other provisions of this note, but this note will be construed as if those invalid, illegal, or unenforceable provisions had never been contained in it, unless the deletion of those provisions would result in such a material change so as to cause completion of the transactions contemplated by this note to be unreasonable.

11.12. NOTICES.

  • (a) Writing; Permitted Delivery Methods. Each party giving or making any notice, request, demand, or other communication required or permitted by this note shall give that notice in writing and use one of the following types of delivery, each of which is a writing for purposes of this note: personal delivery, mail (registered or certified mail, postage prepaid, return-receipt requested), nationally recognized overnight courier (fees prepaid), facsimile, or email.
  • (b) Addresses. A party shall address notices under this section to a party at the following addresses: 
    • If to the Borrower:
    • If to the Holder:
    • ,  
  • (c) Effectiveness. A notice is effective only if the party giving notice complies with subsections (a) and (b) and if the recipient receives the notice.

12.13. WAIVER.

No waiver of a breach, failure of any condition, or any right or remedy contained in or granted by the provisions of this note will be effective unless it is in writing and signed by the party waiving the breach, failure, right, or remedy. No waiver of any breach, failure, right, or remedy will be deemed a waiver of any other breach, failure, right, or remedy, whether or not similar, and no waiver will constitute a continuing waiver, unless the writing so specifies.

13.14. HEADINGS.

The descriptive headings of the sections and subsections of this note are for convenience only, and do not affect this note's construction or interpretation.


Each party is signing this agreement on the date stated opposite that party's signature. 


Title: Title:


Title: Title:


Secured Demand Promissory Note - Free Template

Make sure your demand for payment for collateral-backed loans is worded right when it's time for the borrower to pay you back. Ensure timely repayment of a loan with a secured demand promissory note.

Complete your document with ease

    Fill and download for free
    Answer guided questions to create and download your document quickly
    Personalize your document to meet your needs with a rich editor (additional fee)
    Sign electronically
    Self-sign or request signatures online securely in just a few clicks (additional fee)

How-to guides, articles, and any other content appearing on this page are for informational purposes only, do not constitute legal advice, and are no substitute for the advice of an attorney.

Secured demand promissory note: How-to guide 

Businesses can face significant capital challenges and, hence, often borrow money to maintain their operations. They may seek assistance from financial institutions, as well as from friends and family members. 

A promissory note could be a valuable resource for those looking for details on loan conditions and arrangements. A written note can minimize confusion, misunderstanding, and error. It sets forth the parties’ expectations and fulfillment obligations.  

What is a secured demand promissory note?

A secured demand promissory note helps businesses easily borrow money from a lender by assigning their property as collateral under the demand note. It also states that the borrower must immediately pay the loan amount back to the lender when demanded. 

Difference between a secured promissory note and an unsecured promissory note

In a secured promissory note, the lender holds a secured interest in the borrower’s property. If the borrower defaults on the loan, the lender can immediately seize that personal property. Secured promissory notes are supplemented with and supported by security agreements.

On the other hand, with unsecured promissory notes, the lender has no secured interest for the money lent. If the borrower fails to repay the loan, the lender needs to take the legal route to demand payment from the borrower.

Benefits of a secured promissory note

Borrowers who agree to sign secured notes may find loans more readily available to them. Lenders know that if a default occurs, they can sell the property used as collateral under the secured note. This protection may, in turn, make a borrower more comfortable with the loan arrangement. Nobody wants to default on a loan or force others to absorb losses on their behalf. With a secured note, you can be sure you’re not leaving lenders, who may be colleagues or other individuals close to you—out in the cold.

Steps to follow while drafting a secured demand promissory note

1. Memorialize a property’s security interest

A security interest in a property can be marked with a financing statement, called a UCC financing statement. Once a UCC financing statement is completed and filed with the correct governmental authority, the lender’s interest in the property is considered “perfected.” This means that if future lenders also seek a security interest in the same asset, the lender with the perfected interest would have top priority and could seize the property after a default.

2. Choose the right interest rate

When setting an interest rate for a loan, choosing a fair and reasonable number is essential. Even if an illegal interest rate is selected, the loan agreement will automatically adjust it to a legal one. However, selecting a more reasonable interest rate can reduce the chances of default and lead to a smoother and less strained relationship between the parties involved.

3. Review the note

Both parties should review the promissory note carefully to ensure that all important terms of the agreement have been included. This helps to avoid any misunderstandings or disputes in the future. It is also crucial not to presume anything that hasn’t been mentioned explicitly in the document.

4. Sign the note

The parties should sign only one original document, and that original should be given to the lender. You can create a photocopy of the note that says “Copy” and give it to the borrower. Once the note is fully paid, the lender should return the original note to the borrower.

Depending on the terms, you may choose to have your note witnessed or notarized to limit challenges to the signatures' validity.

If your agreement is complicated, contact an attorney to help create a document that meets your needs. 

Key components in secured demand promissory notes

It’s important that these clauses, like how much will be borrowed and what interest rates will be applicable, are included in the note. A good agreement accurately captures the parties' intentions. Hence, clarify the terms and conditions of your loan before memorializing them in written form.

The following sections will help you understand the terms of your secured promissory note form.


This section identifies the document as a promissory note. Write the effective date of the note and the details about the parties involved.

One party is called the “borrower,” who borrows the money and will pay it back to the “payee.” Note that the payee may or may not be the same entity as the lender. Under some loan agreements, the lender requires the borrower to make payments to a third party.


Herein, the borrower agrees that the borrowed amount will be repaid immediately, whenever the payee demands it.


This section mentions the total principal amount and a legally valid interest rate. The payee can add details of where and how the money must be repaid. 


This section explains that the borrower can pay the lender before the maturity date or before it is specifically demanded and that there is no penalty for doing so.

Security for payment

This clause ensures the borrower’s repayment by listing specific property as collateral. Because this note contemplates the simultaneous signing of a security agreement, the details of the collateral arrangement can be general. A security agreement should provide more information on the collateral pledged. 

Events of default

In this section, list the occasions on which the payee can declare that a default has occurred under the loan. You can also define the period before which the borrower has to repay the amount once the demand is made. 

Acceleration; remedies on default

This section mentions the actions that the payee can take when an event of default occurs. 

Waiver of presentment; demand

This clause indicates that when an event of default occurs, the payee can take action without providing further notice or any explanation to the borrower. 

Governing law

This part allows the parties to choose the state law that’ll be used to interpret the note. 

Collection costs and attorney’s fees

In this section, the borrower accepts the responsibility of paying any expenses for collecting money or attorney’s fees under the note.

Successors and assigns

This section clarifies that the parties' rights and obligations will be transferred to their heirs in the event of death. Similarly, in the case of business transfer, these rights and obligations will be passed on to successor organizations.


This clause protects the terms of the note as a whole, even if one part is later invalidated. 


This section outlines the mailing addresses of the borrower and the payee for official and legal correspondence.

No implied waiver

This section explains that even if the payee ignores or allows the borrower to break an obligation under the note, it doesn’t mean the payee waives future rights to require the borrower to fulfill those obligations.

Entire agreement

This section mentions that the signed agreement is final and it is “the agreement” about the promissory note. 


This part clarifies that the titles appearing at the start of each section are intended to arrange the document and shouldn’t be regarded as functional components of the note.

Frequently asked questions

What is a secured promissory note?

Not all businesses turn a profit the first day their doors open. Some owners need a loan to keep the lights on long enough to stay afloat. However, big financial institutions can be unwilling to take a chance on new, small businesses. This is where friends and family come in and where a promissory note is helpful. Adding collateral to make it a secured promissory note can help motivate lenders or ease any initial reluctance.

Can a promissory note be on demand?

Yes, a promissory note can be on demand. It means that the borrower must immediately repay the loan to the lender when they demand it. 

Here's the information you'll need to have handy to complete your secured demand promissory note:

  • Who the lender is: Have the name and contact information of the lender or payee ready
  • Who the borrower is: Have the borrower’s information available
  • Who the holder is: The holder might be the lender or a third party
ATTORNEY ADVERTISEMENT: Attorneys advertised on this site are independent attorneys. in your area who’s responsible for this advertisement. LegalZoom.com, Inc. is not an "attorney referral service" or a law firm. The information you provide to LegalZoom is not protected by attorney-client privilege. about this advertisement if you live in Alabama, Missouri, or New York.