D-2-6- the promissory note and its advantages and drawbacks

2-6-1- The promissory note: definition

The promissory note is a payment tool that can be seen as a bill of exchange in that it is also a commitment to pay by the due date. The difference between the two payment tools is that the roles of the stakeholders, the issuer and the payee, are reversed.

Here, the importer, the issuer, agrees to make the payment. From this perspective, the payee receives promissory note. In turn, the payee presents the promissory note by the due date through a banking intermediary. The deadline date to present the promissory note must not exceed three months after its issuance.

There is now an electronic promissory note (BOR); a computer document which can be transmitted and stored electronically. As with other payment tools, the promissory note has its advantages and drawbacks.

2-6-2- The promissory note: advantages

An advantage for a promissory note versus a check is the fact that it can be not provided with sufficient funds in the account on the issue date and, to the contrary, must have sufficient fund on the due date. Other advantages :
  • It is simple to use,
  • it is quickly implemented,
  • It can be endorsed, negotiated or backed.

2-6-2- The promissory note: drawbacks

Drawbacks of the promissory note within the scope of international transactions:
  • it can be sometime issued late.,
  • there is a risk of error,
  • it is not often used for international transactions.