Minnesota Promissory Note

Introduction

Key Things to Know

1. 1

   A promissory note is a written, signed promise by one party (the maker) to pay a definite sum of money to another party (the payee), either on demand or by a set date.

2. 2

   Minnesota caps interest at 8% per year on a general private loan when a rate is set in writing, with a 6% default rate if no written rate is set at all. A loan under $100,000 for business or agricultural purposes follows a different formula, up to 4.5 percentage points over the 90-day commercial paper discount rate at the regional Federal Reserve Bank, and loans of $100,000 or more are exempt from Chapter 334's rate limits entirely. (Minnesota Statutes Sections 334.01, 334.011)

3. 3

   A Minnesota promissory note does not need to be notarized or witnessed to be enforceable. Minnesota Statutes Section 336.3-104 lists what makes a note a valid negotiable instrument (an unconditional promise, a fixed amount, a signature, payable on demand or by a definite date), and notarization isn't one of the requirements.

4. 4

   Confession-of-judgment clauses (letting the payee obtain a court judgment without a full lawsuit) are not banned outright in Minnesota, but they only work through a separate court filing, either a statement signed and verified by the maker or an attorney-filed plea with a document distinct from the note itself, under Minnesota Statutes Sections 548.22 and 548.23. A confession-of-judgment provision written into a consumer credit sale contract specifically is void under Minnesota Statutes Section 325G.16.

5. 5

   You generally have 6 years from a missed payment or the note's stated due date to sue to collect on a written promissory note in Minnesota. (Minnesota Statutes Section 541.05, Subdivision 1(1))

6. 6

   If a Minnesota promissory note is secured by personal property, the lender generally needs to file a UCC-1 financing statement with the Minnesota Secretary of State to protect its priority against other creditors. (Minnesota Statutes Section 336.9-310)

7. 7

   Promissory notes are commonly used in Minnesota for family loans, small business loans, and LLC loans between members. A private, occasional lender does not need a Minnesota Regulated Loan Act license, which only applies to someone engaged in the business of making loans. (Minnesota Statutes Section 56.01)

Minnesota Requirements for Promissory Note

• Maximum Legal Interest Rate (Minnesota Statutes Section 334.01)

  For a general private loan, the maximum rate is 8% per annum if set in writing; the default statutory rate absent a written rate is 6% per annum. A loan under $100,000 for business or agricultural purposes follows a different formula (Minnesota Statutes Section 334.011), and a loan of $100,000 or more under a signed written contract is exempt from Chapter 334's rate limits entirely.

• Statute of Limitations (Minnesota Statutes § 541.05)

  Generally 6 years from a missed payment or the note's stated due date to sue to collect on a written promissory note, under the general limitations period for an action on a written contract.

• Regulated Loan Act Licensing Scope (Minnesota Statutes Section 56.01)

  A Minnesota Department of Commerce lender's license under the Minnesota Regulated Loan Act is required only for a person engaged in the business of making loans. An isolated private person-to-person promissory note does not trigger this licensing requirement.

• Secured Transaction Filing (Minnesota Statutes Section 336.9-310)

  If a note is secured by personal property, the lender generally must file a UCC-1 financing statement with the Minnesota Secretary of State to perfect and prioritize its security interest against other creditors.

• Negotiability Requirements (Minnesota Statutes § 336.3-104)

  To be a valid negotiable instrument, a note must be an unconditional promise to pay a fixed amount, signed by the maker, and payable on demand or at a definite time.

• Confession of Judgment Requires a Separate Filing (Minnesota Statutes Sections 548.22, 548.23)

  Confession of judgment on a Minnesota note is accomplished only through a separate document, a debtor-signed and verified statement or an attorney-filed plea with an instrument distinct from the note, filed with the court; a clause embedded in the note itself does not by itself create an enforceable confession of judgment. A confession-of-judgment power of attorney written into a consumer credit sale contract specifically is void (Minnesota Statutes Section 325G.16).

• Notarization Not Required for Validity (Minnesota Statutes Section 336.3-104)

  Minnesota does not require a promissory note to be notarized or witnessed to be enforceable. Section 336.3-104's list of what makes a note a valid negotiable instrument does not include notarization or witnessing; notarization is optional and used only for evidentiary purposes.

• Business or Agricultural Loan Rate Formula (Minnesota Statutes Section 334.011)

  For a loan under $100,000 for business or agricultural purposes, any lender, not only a licensed institution, may charge interest at up to 4.5 percentage points over the 90-day commercial paper discount rate at the Federal Reserve Bank for the district covering Minnesota, notwithstanding the general 8% cap that applies to other private loans.