Revolving Promissory Note for Canada

Revolving Promissory Note Template for Canada

A Revolving Promissory Note is a legal financial instrument used in Canadian jurisdictions that combines the features of a traditional promissory note with a revolving credit facility. It documents a borrower's unconditional promise to pay a specified sum to a lender, while allowing the borrower to draw down, repay, and redraw funds up to a predetermined credit limit. The document is governed by Canadian federal laws, particularly the Bills of Exchange Act, and relevant provincial legislation, incorporating essential elements such as payment terms, interest calculations, security provisions if applicable, and events of default.

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What is a Revolving Promissory Note?

The Revolving Promissory Note is commonly used in Canadian business transactions where parties require a flexible credit arrangement that allows for multiple drawdowns and repayments over time. This document is particularly useful for businesses with fluctuating capital needs or ongoing funding requirements. It combines the legal enforceability of a promissory note with the flexibility of a revolving credit facility, making it suitable for various commercial financing scenarios. The document must comply with Canadian federal legislation, including the Bills of Exchange Act and Interest Act, as well as applicable provincial laws. It typically includes detailed provisions for credit limits, interest calculations, drawdown procedures, repayment terms, and default remedies. This type of note is often used in business-to-business lending, bank financing, and commercial credit arrangements.

What sections should be included in a Revolving Promissory Note?

1. Parties: Identification of the Lender (Payee) and Borrower (Maker) with full legal names and addresses

2. Background: Brief context of the revolving credit arrangement and relationship between the parties

3. Definitions: Key terms including 'Principal Amount', 'Credit Limit', 'Interest Rate', 'Payment Date', 'Event of Default', etc.

4. Promise to Pay: Unconditional promise to pay the principal and interest, specifying the revolving nature of the facility

5. Credit Limit: Maximum amount that can be borrowed under the revolving facility

6. Interest Rate: Interest rate(s) applicable to outstanding amounts, calculation method, and payment frequency

7. Drawdown Provisions: Terms and conditions for requesting and receiving advances under the note

8. Repayment Terms: Details of payment obligations, including minimum payments and repayment schedule

9. Events of Default: Circumstances that constitute default and consequences thereof

10. Remedies: Rights and remedies of the lender upon occurrence of an event of default

11. Governing Law: Specification of Canadian law and applicable jurisdiction

What sections are optional to include in a Revolving Promissory Note?

1. Security: Include when the note is secured by collateral or personal property

2. Guarantees: Include when there are third-party guarantors for the note

3. Prepayment Rights: Include when specific prepayment privileges or penalties apply

4. Representations and Warranties: Include for complex commercial arrangements or high-value notes

5. Conditions Precedent: Include when advances are subject to specific conditions being met

6. Notice Provisions: Include when specific notice requirements for drawdowns or other actions are needed

7. Assignment Rights: Include when transfer or assignment of the note needs to be addressed

8. Tax Provisions: Include when tax implications need to be specifically addressed

What schedules should be included in a Revolving Promissory Note?

1. Schedule A - Drawdown Request Form: Standard form for requesting advances under the note

2. Schedule B - Repayment Schedule: Detailed payment schedule if complex payment terms apply

3. Schedule C - Security Details: Description of any collateral or security interests if applicable

4. Schedule D - Calculation of Interest: Detailed methodology for interest calculation if complex

5. Appendix 1 - Compliance Certificate: Form for periodic confirmation of compliance with note terms if required

Authors

Alex Denne

Head of Growth (Open Source Law) @ Genie AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Jurisdiction

Canada

Publisher

Genie AI

Document Type

Loan Agreement

Sector

Banking

Cost

Free to use
Relevant legal definitions
Relevant Industries

Banking and Financial Services

Commercial Lending

Private Lending

Small Business

Real Estate

Manufacturing

Retail

Construction

Professional Services

Technology

Agriculture

Relevant Teams

Legal

Finance

Treasury

Credit and Collections

Risk Management

Compliance

Corporate Secretariat

Commercial Banking

Business Development

Accounting

Relevant Roles

Chief Financial Officer

Finance Director

Treasury Manager

Corporate Lawyer

Legal Counsel

Credit Manager

Financial Controller

Lending Officer

Commercial Banking Manager

Risk Manager

Corporate Secretary

Business Development Manager

Account Manager

Financial Analyst

Compliance Officer

Industries
Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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