What are Loan Notes?
A loan note is a financial instrument which is essentially an IOU (usually from a business) to repay money borrowed by it in installments over a set period, typically paying interest and capital at a variable or fixed interest rate. When you purchase a loan note, you purchase this ‘IOU’ and become a noteholder.
Investors receive interest payments on an annual basis, depending on the term of the particular investment. Loan notes are structured with the aim of providing an attractive return on a solid investment opportunity.
A loan note will include all of the associated loan terms as a form of promissory agreement. This is considered as a legally binding agreement with both parties considered committed to the terms as they are written. The note is considered valid until the amount listed on the document is paid in full by the borrower.
The loan note is legally binding and will contain all the relevant details regarding the agreement. This information is usually also published in the respective company’s brochure. This will include the names and contact information for all parties, as well as the principal balance and any interest rate being applied over the term.
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