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Business Note! How to Sell a Business Note?

Business Note! How to Sell a Business Note?

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 month 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 is he selling? He does not own the real estate; He does not 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 person 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 do not 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



4.Liquor Stores

5.Auto Repair Shops

6.Gas Stations

7.Tire Stores


9.Hair, Nail and Day Salons

10.Dental Practices

11.Medical Practices


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 times payments made already)

D. Buyer's previous experience in business

E. Buyer has a 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.

Source by Paul Sherman

mitchel turner
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