Business Note! How to Sell a
Business Note |
By Paul Sherman |
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Business notes are created when a business owner sells a business
using owner-financing. Seller Financed Business Notes, or Seller
Carry-Back Notes, are almost identical to Owner Financed Mortgage
Notes, except that they are notes created from the sale of a
business instead of a home or property.
It is significantly
more difficult to get a bank loan for the purchase of a small
business than it is to get a loan for the purchase of a home.
Businesses historically have a high failure rate, and often do not
have enough collateral to satisfy a bank loan.
It is very
common for the seller of a business to take back a note (or "carry
the loan") to help with the sale of the business. Business sellers
usually have no choice but to offer seller-financing. They often
accept a down payment for part of the sale, and a promissory
business note for the balance. The usual down payment is 33-1/3%,
and the seller receives a monthly payment from the buyer for 5 to 7
years. There may or may not be a balloon, interest rate is
negotiated.
A true business note does not have real-estate as
part of the collateral, the security for the note. Here is an easy
way to think about that. Think about any store in any mall you've
ever been in. The owner of the mall leases the individual spaces to
business owners, who then operate their business out of those
spaces. The owner of business can sell that business at any time in
the future, but what he is selling He doesn't own the real
estate; he doesn't even own the space he's operating out of. However
he can certainly sell the business. Therefore, when we talk about a
true business note, we are talking about the sale of business only,
where there is no real estate involved.
There are times when
the seller is content to receive the payments over many years but it
is often the case that they have needs for a lump sum payment
instead of collecting the payments over time. The person holding the
note however does not want to wait that long to receive all the
money from the business, so he or she looks for a someone to buy all
or part of the note being held.
10 Top reasons business note
holders may want to sell their business note:
1. To Raise
cash.
2. To Eliminate debt
3. To have the capital to start
their next project
4. Enhance their investment portfolio or
planning a new investment strategy
5. Want to buy real estate,
home, car, boat or plane
7. Need to fund a child's education
8. To Fund their favorite cause or charity
9. To Eliminate the
hassle and worry of collecting payments
10. Or just want to
take the vacation of a lifetime
To meet your current
financial objectives, you can now sell your business notes. In some
cases you can sell all the remaining payments of your business note,
while in other cases you may sell just enough payments to meet your
need. And don't worry about your business's buyer. When you sell
your note, the sale does not affect the buyer at all. Their contract
terms remain the same.
There is such a broad range of
different types of business notes that can be purchased, it would be
impossible to list them all. Eligible Businesses on which NOTES are
sold include, but are not limited to:
1.Dry cleaners
2.Laundries
3.Mini-Markets
4.Liquor Stores
5.Auto
Repair Shops
6.Gas Stations
7.Tire Stores
8.Florists
9.Hair, Nail and Day Salons
10.Dental Practices
11.Medical
Practices
12.Printers
13.Convenience Stores
14.Restaurants/ Bars
15.Manufacturing Companies
16.Various
Service Industries
17.Pest Control companies
18.Mail and
Packaging Centers
19.Building Maintenance Services
- And
many others . . .
Typical Business Note Buying Criteria
A. "First" position as lien holder
B. Substantial down payment
(usually 30%-35% minimum)
C. "Seasoning" (3-5 timely payments
made already)
D. Buyer's previous experience in business
E. Buyer has good Fico credit score (625-650 or above)
F. Note
must be fully amortized and in first position
G. Note must be
personally guaranteed
While these are typical criteria
desired, but each transaction is considered on its own terms and
strengths. Every note is reviewed on an individual basis.
I
personally believe that most important reason to sell your business
note today is that you take advantage of the financial principle of
the ?Time Value of Money, which means that a dollar is more valuable
to you today than it will be in the future; you get your money
before inflation kills its value.
One good company to sell
your business notes is Financial Ease. Their website address is
http://www.financial-ease.com . They also offer funding for Mortgage
notes, Trust deeds, Structural settlements, Life settlements and
Lawsuit pre-settlements. Their services are nationwide. |
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