Promissory Note Procedure

General Guidelines

The promise to pay usually includes a principal amount, an interest rate, a maturity date (when payments cease and the note becomes due), and provisions dealing with default and state of governance
Be sure to name your IRA as the lender
"PENSCO Trust Company Custodian F.B.O." + [Your Full Name] + "IRA" (or SEP IRA, Roth IRA, etc.) + "Your Account Number".

Example

PENSCO Trust Company F.B.O. Mary J. Investor, IRA, Acct. IN123

Required Documentation for an IRA lending to an Individual

PENSCO Trust's Promissory Note Authorization Form

This form helps you summarize the information contained in your actual note.

Note: You may also want to download the Promissory Note Checklist.
Download PDF
PENSCO Trust's Investment Authorization Form for Non-Publicly Traded Investments

This form authorizes the funding of your note by indicating the exact dollar amount that will be sent out and the delivery method (e.g., wire, check mailed to a particular address, etc.). Download PDF
PENSCO Trust's Promissory Note Servicing Agreement Form

This form is where you indicate who or what firm will be servicing your note. PENSCO Trust does not service notes, which means that we do not collect from borrowers. This means, we do receive the borrowers payments, and we apply them to your IRA as indicated, but we do not proactively collect (i.e. chase) late payments, or calculate amortization if necessary. You may perform the function personally as long as you do not accept loan payments personally (i.e. you could receive the checks in the mail, add necessary notation, and forward to PENSCO Trust for deposit. If you feel you need this service performed for you, we can supply referrals to firms that provide note servicing, or you can obtain your own note-servicing firm. Download PDF
Original Note

You must have the borrower's signature notarized on both the form and the note. We will also need to know the borrower's address, social security number, and birth date.
Additional Required Documentation for an IRA lending to an Entity

When you are investing with your IRA in an promissory note issued by an entity (e.g., a corporation), you will need to supply us with items 1-4 above, as well as information about the entity. The documents required for each type of entity are outlined by type in our Private Investment Guidelines. Please submit (or have the borrowing entity submit) these documents along with items 1-4 above.

Click here to learn how to file a new investment with PENSCO Trust.

Notes before Submitting Your Investment Authorization to PENSCO Trust

IRA Owner must read, approve, and pre-sign all documents before submitting to PENSCO Trust for the final custodial signatures. PENSCO Trust signs as your IRA (the lender). However, we cannot sign until the IRA Owner has already pre-signed or initialed beside all signature lines. Once you send in the forms and documents mentioned above, we will fund the borrower in the manner you specify on the Investment Authorization form in return for the original signed note. We generally require that an intermediary escrow agent act as the exchange agent. You should, therefore, contact us to discuss your particular circumstances (contact info below). Once we have available funds in your IRA and have received completed paperwork, we shall be able to fund your loan investment within 24-48 hours.

Post Funding

PENSCO Trust will hold the note in our vault and accept payments to your IRA as they are made. All income and expenses must flow directly between the borrower and PENSCO Trust as your IRA custodian.