Home Loans
Business Note! How to Sell a Business Note?
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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
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