A type of promissory note executed and delivered by the borrower under a commercial real estate loan. A B-note is subordinate to one or more senior promissory notes, which are referred to as A-notes.

B-notes carry a higher interest rate than A-notes and are attractive to investors purchasing interests in commercial real estate loans on the secondary market.

A lender may divide a loan into one or more A-notes and B-notes either:

In commercial mortgage-backed securities (CMBS) financing, the lender typically deposits A-notes into a securitization trust while retaining B-notes outside of the trust for direct sale to investors. For more information on the role of B-note investors in CMBS transactions, see Practice Note, Commercial Mortgage-Backed Securities (CMBS) Finance: Overview: Investors.