Business notes are explanatory notations attached to a business document. The notations contain disclosures or a record of all the important information to do with the business or the specific document. Business notes are considered as integral parts of any important document in relation to a business. Some people refer to them as footnotes as well. An example is a financial statement. In cases where business owners sell their businesses or finance a loan with a business note, getting out of the transaction business of the company may be difficult. The business note makes them captives to the business. This happens more times than business owners would like to admit. However, it does not have to be the case anymore. Businesses notes can be sold to note buyers who are emerging more and more in the industry. Some business owners opt to prepare business notes in order to sell them afterward. In order to be able to sell your business notes, you must consider the following facts;
Avoid Financing More than Seventy Percent of the Sale of Your Business
A properly structured business note contains a minimum of thirty percent verifiable cash. The credit of the buyer is also an important facet to look into. A buyer with a good credit score and an impeccable financial history reduces the risks in the transaction and make it possible for the business note to be sold. It is also important to make sure that the buyer is not getting financial assistance from another financial institution for the down payment. This way you can Learn more on the role of the sole financial institution.
Consider the Interest Rate
The terms of the business note should include a 9 to 12 percent optimal interest rate. This plays a major role in attracting the business note buyer. Any rate that is lower than this is a risk that only a bank can afford to make. A higher rate may also be unfair to the buyer who most of the time has had to borrow the money to purchase the note.
Familiarize with Short Note Terms
Shorter termed notes result in more money than the longer termed notes. However, how long should a short-termed note be? A term that lasts for less than one year is a primitive business decision. A short-termed note should take between one to five years. In order to make the cash turn over more beneficial in the future, the note owner can also come up with a fully amortized payment schedule. You can also get a written guarantee when dealing with buyers with whom you share a relationship.
Who to Sell Your Business Notes to
Selling a business note to a buyer in the secondary market is not a small task. You have to ensure that the buyer has the right kind of funding. This will help you get the best financial benefit from the sell and also ensure that the performance of the buyer is efficient and effective. Experience of the buyer is also fundamental. A good buyer should successfully be able to fund your business note and have experience in the industry.