Note Payable: Definition, Types, Example

By Kristi Waterworth – Updated May 20, 2025 at 2:15 PM EST

Key Points

A note payable is a formal, legally binding debt agreement in writing.
Includes details like repayment terms, interest rate, and maturity date.
Can be short-term (due within a year) or long-term (more than a year).
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Businesses often need to borrow money to pay for things, rather than using cash they're holding in reserve. To do this, they may use one of many instruments, including a note payable. Read on to understand this financial tool, the types of notes payable, and what it takes to make one official.

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About the Author

Kristi Waterworth has been a contributing real estate and financial expert at The Motley Fool, covering real estate, investing, and personal finance topics, since 2020. Kristi has been interviewed by various TV media outlets and podcasts for her real estate investing expertise – from residential real estate to digital real estate and everything in between. Kristi’s journalist career spans over 25 years, and she has written about real estate investing, homeownership, and home construction specifically for the last decade. She was also previously a licensed Realtor and general building contractor before the Great Recession and housing market collapse. She holds a bachelor’s degree in American history from Columbia College in Missouri.

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