It definitely helps to sell your business if you carry a note for the buyer. In articles below I've previously discussed how to secure your business note.
What about selling your note after the close of escrow? Do you want to effectively "cash out" of the sale? There are Companies and Investors who specialize in purchasing Business Notes (of course at a discount). You can sell all or part of your note. Most of the Companies/Investors will offer to buy year to year of the note. In other words buy the first two or three years of payments. After collecting for the agreed upon amount of time, the note and its payments would revert back to the seller of the business. Of course the seller can sell the entire note too (and most end up doing that).
The note buyers will purchase the note at a discounted amount of the face value. Discounts vary according to several factors. Interest rate, length of note amortization, buyer's down payment, buyer's strength both financially and experience wise, type of business, note position (1st, 2nd) and note seasoning. Below are a few of the most important guide lines.
Down Payment: The higher the down payment on the business sale the lower the discount of your note will be. Down payments should be at least 30% of the purchase price. Bringing the down payment up to 40-50% of the purchase price will greatly help reduce your note discount.
Note Positioning: The note should be in the 1st position as a lien on the business. 2nd's are harder to sell and if you do find a buyer for a 2nd it will get heavily discounted.
Rate and Term: Interest rate should be 7% or higher and the term shouldn't be beyond 60 months in order to maximize your buy out.
Seasoning: Note buyers like to see that the business buyer has made a few payments before they buy the note. I used to sell these straight out of escrow, but today note buyers like the note "seasoned" for a minimum of 2 months. The longer the seasoning, the less your note will get discounted.
Discounting: Discounts usually range from 10% to 30% of the face value of the note. All of the factors discussed above will come into play in determining the discount rate.
|Helpful Resources To Assist In Selling And Buying California Businesses|
|Janet Carrera: Escrow & Bulk Sale Service - SF Bay Area
Redwood Escrow Services, Inc. is a full service, licensed independent escrow company. We are EAFC Fidelity bonded, fully insured & licensed with the Department of Corporations. Committed to offering our clients the most comprehensive variety of escrow services available. Phone Janet at 510-247-0741.
|William F. Ziprick, Attorney: Legal Services For Buyers And Sellers
Through creative problem solving, attention to detail, accessibility, & understanding that unnecessary delay is often a deal killer, I work closely with my clients and other professionals to consistently achieve a high rate of closings. Office: 909-255-8353, Cell: 509-951-7230.
|Helen Yoo, New Century Escrow - Escrow Services In Southern California
New Century Escrow, Inc. is a fully licensed & bonded independent escrow company. Over 20 years combined experience in handling bulk escrow transactions. Multi-lingual staff that speaks your language, including Korean, Chinese, Vietnamese. Call Helen Yoo direct at 626-890-1151.
|Shalonda Chappel: Escrow & Bulk Sale Services - Southern California
Escrow services to brokers/agents, sellers, & buyers. Established 43 years. Extraordinary service. Experienced with handling difficult transactions. One stop for all your escrow needs: Bulk sales, lien searches, UCC searches, liquor license transfers, publishing & recording services. 951-808-3972.
|Willard Michlin, CPA, Certified Fraud Examiner, Due Diligence
Willard Michlin, CPA #106752, offers buyers step by step training & assistance in doing Due Diligence Services when they are thinking of making an offer, or are in process of investigating a business purchase. He helps to determine the actual net profit even when there is cash. Call 805-428-2063.
|Diane Boudreau-Tschetter: Escrow & Bulk Sale Services - CA
California Business Escrow, Inc. is a full service independent escrow company serving all of California and has expertise in a wide range of escrows. Our team prides itself on providing an exceptional escrow experience. For more info phone Diane Boudreau-Tschetter at 888-383-3331 or 209-838-1100.
|Elizabeth McGovern: Escrow Services - San Francisco Bay Area
McGovern Escrow Services, Inc., is a leading independent escrow company. We are a trusted partner with our clients, assisting them through the tangled bulk sale & liquor license transfer process. We provide attentive, quality & innovative customer service. Phone Elizabeth McGovern at 415-735-3645.
|Brad Steinberg, Business Broker: Laundromat Specialist
PWS is the leading laundromat broker in California. Since 1968 PWS has brokered over 2,500 laundromat sales. With over 90 employees dedicated to the coin laundry industry, PWS has 18 licensed agents, a 3 person in-house finance department, 10 service technicians and a 20 person parts department.
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