Promissory Notes in Construction Debt Collection


Promissory Notes in Construction Debt Collection

Material supply companies for the construction industry have collection issues and problem accounts. When working with delinquent accounts, have the customer sign a promissory note. This can help prove they owe you money should legal action be necessary.

What Are Promissory Notes?

Promissory notes are written contracts confirming the customers' commitment to paying the agreed upon amount. They should state the specific amount of the debt and the terms of repayment, including interest, due date, and repayment schedule. It should also outline clear consequences should the customer default. As with any contract, the note must be signed by both parties to be valid.

Requesting a delinquent customer sign a promissory note is common practice for building material providers. Even with a signed agreement, there is no guarantee of repayment. When adequately prepared, the record makes later action easier should the situation arise.

Promissory Note Enforcement

Promissory notes are legally binding; thus, they are regulated by the Fair Credit Lending Act which provides protections for customer/borrower’s rights. A debt collection firm with years of experience in construction debt collection can provide insight into collection enforcement best practices.

Experienced debt collection firms are very efficient in mitigating your losses when a customer breaches their agreement. Supply companies tend to see better results with less hassle when operating with a debt collection firm before considering litigation. A knowledgeable debt collection firm can advise you if the situation warrants legal action.

Promissory Notes and Litigation

Promissory notes are legal contracts. If the customer fails to honor the agreement, you can bring legal action on the note alone. You do not need to sue on the underlying sale of construction materials. Defaulting on a promissory note is a civil matter, and is dealt with in civil court. Litigation on such issues can be remedied through suit or judgment.

For 100 years, The Kaighn Company has offered debt collection solutions. Need help with construction industry debt? Schedule a time to talk—call 908-319-5155 or email

Alison De Vito