Business Note! How to Sell a
Business Note? |
By Paul Sherman |
|
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?
6. Need to pay for a medical
emergency?
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. |
|
|
|
|
|
