You sold your business and agreed to be paid over time. We tell you honestly whether buyers will bid on that note, and show the full pricing behind any offer that comes back.
Why business note holders hear a low number, or none.
The same worksheet comes with every offer.
| Remaining balance | $129,400 |
|---|---|
| Payments left | 168 |
| Buyer’s target yield | 8.0% |
| Purchase price | $115,000 |
| Discount from balance | 11.1% |
| Our fee | shown on every offer |
| Sell the whole note | Sell 60 payments | Keep it | |
|---|---|---|---|
| Cash today | $115,000 | $56,200 | $0 |
| Payments still coming to you | None | 108 payments of $1,140 | 168 payments of $1,140 |
| Total you receive | $115,000 | $179,320 | $191,520 |
| What you give up | Every future payment | The next five years | A lump sum now |
Illustrative example. Totals add up the payments as scheduled; they assume the payer keeps paying and are not adjusted for the value of money over time.
Promissory note and security agreementUCC filing and personal guaranteeBusiness sale agreementPayment historyA business note comes from the sale of a business. You agreed a price, the buyer paid part of it at closing, and you took the rest in installments. The promise to pay that remainder is the note, and it is the hardest kind of note to sell. Some do not sell at all.
The reason is the collateral. A house can be taken back and resold. A business that has stopped paying its note has in all likelihood stopped doing well, and what it owns is worth much less in a closing-down sale than it was as part of a going concern.
The buyer of a business note is therefore relying mainly on the business continuing to succeed, which is harder to judge than a property value. Few buyers are willing to do it, and those who are want a high return on their money. For you that means a deep discount.
This is the first thing a note buyer asks.
Real estate is the one that widens the field of buyers, because it can be recovered whether or not the business survives. If your note has none, read can I sell a business note with no real estate behind it for a frank view of the odds. Since the security decides who will look at the file, put it first when you send us the note details: the UCC filing, any personal guarantee, any real estate. If no buyer will bid, you will hear that from us along with the reason.
After the security, a buyer turns to the business and the person running it. An established firm with steady customers is easier to place than a restaurant, a new venture or a business built around one person. The down payment shows how much of their own money the buyer of your business put in. Personal credit and the business’s financial statements show whether the payments are affordable.
Payment history counts for a great deal here, since a long run of on-time payments is the best evidence that the business is working under its new owner.
Confirm that your security filing is still in force. UCC filings generally lapse after a set period unless they are renewed, and a lapsed filing can cost you your place in line. An attorney can confirm where yours stands and whether any lender ranks ahead of you.
Look for a subordination clause as well. If the buyer of your business also took a bank loan, you may have agreed to stand behind the bank.
Then read the sale agreement for anything that lets the payer withhold payments, such as a dispute over what you promised about the business, because buyers leave a disputed note alone.
A buyer unwilling to take on seven years of a business note may take two or three, because less can go wrong with a business over a shorter stretch. That is the reasoning behind partials on business notes, and it makes this the one place among the types of notes you can sell where a shorter sale can turn a refusal into a bid.
Before you raise it with anyone, work out how many payments you could give up without missing the income, and gather what you know about how the business has traded since you left it. A buyer will ask both questions early, and the second one carries more weight.
No. Notes with no security, a short payment record or a struggling business often draw no offers. We would sooner tell you that at the start than keep you waiting for a bid that is not coming.
Because the buyer is relying on the business staying healthy, and has little to recover if it does not. Fewer buyers take that risk, and those who do ask for a high yield. The higher the yield, the less they pay.
It helps, if the person who gave it has assets and good credit. A personal guarantee from someone with neither adds little. Buyers will look at the guarantor as closely as at the business.
Often it is the most realistic structure. A buyer who will not commit to the whole term may buy the next two or three years of payments. You get cash now and the remaining payments come back to you afterwards.