Revolving Credit Promissory Note Template for the United States

A Revolving Credit Promissory Note is a legal document that creates a flexible borrowing arrangement between a lender and borrower in the United States. Unlike traditional promissory notes that involve a single loan amount, this document allows you to borrow, repay, and reborrow funds up to an agreed credit limit throughout the draw period. This type of arrangement is particularly valuable for businesses needing ongoing access to capital for operational expenses, inventory purchases, or seasonal cash flow management.

When do you need this document?

You need a Revolving Credit Promissory Note when establishing a line of credit relationship that requires repeated access to funds. Small businesses often use these notes to secure working capital lines from banks or private lenders, allowing them to draw funds as needed rather than taking a large upfront loan. Real estate developers frequently utilize revolving credit arrangements to fund construction projects where money is needed at different phases. Additionally, established businesses may need this document when negotiating credit facilities with suppliers or when family members or investors provide ongoing financial support with flexible repayment terms.

Key legal considerations

The most critical aspect of your Revolving Credit Promissory Note is clearly defining the credit limit, interest rate structure, and draw period terms. You must specify whether the interest rate is fixed or variable, how it's calculated, and what triggers any default rates. The document should detail the minimum payment requirements, whether payments go toward principal or interest first, and any fees associated with draws or maintenance of the credit line. Default provisions are equally important, outlining what constitutes a breach and the lender's remedies, including acceleration of the entire debt. You should also include guarantor provisions if a third party is backing the loan, and specify any collateral securing the revolving credit facility.

Legal requirements in United States

Under federal law, your Revolving Credit Promissory Note must comply with the Truth in Lending Act (TILA) and Regulation Z, which require clear disclosure of credit terms, annual percentage rates, and total borrowing costs. If the arrangement involves consumer credit, you must provide detailed disclosures about interest rate changes, minimum payment calculations, and fee structures. The Equal Credit Opportunity Act prohibits discrimination in lending decisions, while the Fair Credit Reporting Act governs how credit information is collected and used. For business credit arrangements, you must ensure compliance with state usury laws that cap interest rates and regulate lending practices. Additionally, if your revolving credit facility exceeds certain thresholds or involves real estate, additional disclosure requirements under the Dodd-Frank Act and Consumer Financial Protection Bureau regulations may apply. State law variations in contract formation, enforcement, and collection procedures also affect how you structure and document the credit arrangement.