Business Notes


Selling a Business and using seller financing?


Disclaimer: Always consult a Business Broker or Attorney before selling a business, the information offered is for use as a guide only and may not guarantee a business note sale, as many variables beyond our control exist.


Business note description

A business note is normally a promissory note secured by a business. This would include any inventory and equipment that belongs to the business, but does not include real estate. The note obligates the individual that bought the business to make the agreed upon payments for a specified amount of time. The buyer would normally give the seller a cash down payment — the more the better — and then make payments to the seller in regularly structured payments. These payments are most often made on a monthly basis, but they can also be quarterly, annually, and/or balloon type payments. Assuming that you have a properly recorded business note, if the payer defaults on his obligation to repay this business note, the seller has the right to go after the business plus the assets in order to recoup their loss. This is of course assuming you have a properly recorded business note, UCC-1 Financing Statement, and other documents needed.


What is involved in the sale of a business note?

When you sell a business note, the investor buying your note needs to get an assignment of the security instrument and a UCC-1 Financing Statement, and will then take an assignment of the promissory note. This finalizes the note sale and transfers ownership to the investor while the seller gets the lump sum of cash he is owed. As your business note broker, I will work closely with you in the collection of the necessary documents needed to finalize this note sale. I will get you the best prices for your promissory note because I have relationships with the top buyers in the country. It usually takes 2-4 weeks to close, depending on how fast documents can be gathered and how quickly the due diligence period runs its course.


The following is a list of the some of the documents needed to close a business note.

  1. Signed note of Personal Guarantee (if corporately signed note).
  2. Sales Purchase Agreement or Asset Purchase Agreement.
  3. Signed Security Agreement or Chattel Mortgage.
  4. UCC-1 Financing Statement recorded at State and County.
  5. Settlement/Closing Statement and escrow instructions.
  6. Covenant Not to Compete (unless already shown in Purchase Agreement).
  7. Operating Licenses such as a liquor license.
  8. Franchise Agreement, if applicable.

With a business note the investor not only looks at the payer’s credit rating and his ability to pay, but he also takes into consideration the business and its ability to be profitable. This is because he will not have a property, as with a real estate note, to foreclose on. If the business fails, there may not be much to go after except the assets associated with the business. Assuming that the promissory note is personally guaranteed, the investor’s risk will not be as much, because the payer is still liable for payment. An investor is looking to make a higher yield on this type of transaction because of the obviously greater risk and minimal security compared with a mortgage note.


What is the investor looking for in a business note?

As a business note broker, I deal with individuals who have sold a business and received a substantial down payment. They will have carried back a loan in the form of a business note; usually this note will be secured by the business itself and the business assets. A good business note will be have a personal guarantee signed by the payer, making him liable personally if he defaults on the loan and the business does not cover the defaulted note amount.


The following is a list of items that can influence how valuable your business note might be:

  1. Down payment – 20%+ is best
  2. Interest rate – 10% + is best
  3. Note term – 60 months or less
  4. Seasoning – at least 1 payment received on time
  5. Profitability – show profit after expenses
  6. Credit rating of payer – 650 +

Having a good down payment can make up for less seasoning, or better seasoning and pay history can compensate for lower down payments. A poor credit rating can be helped with good profitability and seasoning. In other words, just because your note does not meet all of the standards above does not mean you cannot sell your note. This will affect the value unless other factors can over compensate for it.

As a business note broker, I would be happy to evaluate your note to determine if it can be sold and if your price expectations and needs can be met by this sale. I will provide a free, no obligation assessment and quote to you, then you can decide if you want to sell your note. I will not pressure sell you. It is your money and your decision to sell!


Business brokers

I am looking to establish long lasting relationships with business brokers from all parts of the country. You probably have clients that are in need of my services. Wouldn’t you like to send them to someone you can trust to do a great job and also get them the best prices for their note? You win by getting a satisfied customer and a referral fee from me and your client wins by getting professional service. Please email me to discuss the possibility of building a long lasting business relationship.


Click here to provide us with information about your business note.