What Is A Business Note? How To Sell It?
by: PaulSherman
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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.
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:
Dry cleaners, Hair, Nail salons, Auto repair shops, Printers, Medical & Dental practices, Restaurants/ Bars, Mini-markets, Convenience stores, Manufacturing companies, Various Service industries, Pest Control companies, Mail and Packaging centers, 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.
Article Source: http://www.ArticleStreet.com/profile/paulsherman-532.html
About the Author
Paul Sherman is a Cash Flow Consultant. He offers free, professional and independent advice to Individuals, Business owners and Seniors regarding Life Settlements, Structured Settlements, Mortgage & Business notes, Lawsuit funding etc. To sell your Business note, Mortgage note or Life Insurance please visit http://www.Financial-ease.com
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