Business Notes can be Sold for Hard Cash.
Business notes are legally binding financial agreements used between two or more parties to document the sale of a business. There is no real estate involved in these types of transactions; therefore, the actual business and business assets are used as collateral to secure the loan.
Business notes are created when a business owner provides financing to the buyer. Owner financing is particularly helpful for small business owners because it is oftentimes difficult to obtain a small business loan from conventional lending institutions.
With owner financing, the seller acts as the lender and receives periodic payments from the buyer. These payments are generally paid on a monthly basis and include a predetermined interest rate. Business notes are typically carried by the owner for 5 to 7 years. If the transaction is not paid in full by this time, the buyer usually obtains a loan for the balance through a traditional lender.
Although it is possible to personally handle a business note deal, it's not advised unless the sale is valued under $5000. In order to secure the assets of both Seller and Buyer, it is recommended to consult with a Business Law attorney.
Business notes consist of multiple documents including:
Purchase and Sales Agreement: This document outlines the details of agreement between both parties. It should include the names, addresses and other identifying information of each individual involved in the transaction. Additionally, the location of the business and detailed descriptions of assets will be included.
A Purchase and Sales Agreement is the main document in Business Notes and must include the purchase price, specific financing details such as how much will be paid and the date payments are expected. Information about taxes, interest, late fees should be outlined, as well as procedures which will be implemented if the Buyer defaults on the loan.
Lease Agreement and Assignment: This document is required if the seller is leasing space from a third party. In a nutshell, the agreement transfers the lease from the seller to the buyer. If the seller owns the property where the business operates and will be leasing space to the buyer, this agreement will be used to document the details of the lease.
Security Agreement: This document is used to determine collateral for securing a loan. It should include a detailed list of assets including make, model and serial number of equipment included in the sale. Additionally, the Security Agreement should include a detailed description of the duties and obligations of both parties to commence the sale. Last, but not least, this agreement will outline actions and remedies available to the seller should the buyer default on the loan.
Recorded UCC-1: These forms are used to record the transfer of office equipment, specialized business equipment, farm machinery, sound systems, and other personal possessions. The Uniform Commercial Code (UCC) governs financial statements which use personal property as collateral to secure a loan. UCC-1 forms protect the seller's rights to collateral offered in a financial transaction. They are filed with the Secretary of State's office and become public record.
Promissory Notes: Also referred to as a Note Payable, promissory notes document the promise made between seller and buyer. Promissory notes provide detailed information regarding the financial transaction including purchase price, interest rate, repayment plan, and maturity date.
Closing Statement: Sometimes referred to as a Settlement Statement, this document is used to transfer title and ownership from the seller to the buyer. It should include a summary of fees and charges incurred for closing the sale and denote who is responsible for paying them.
Last, but not least, the Business Note package will include tax returns and accounting records for the previous two years, along with a business insurance policy issued to the buyer.
If you currently own a Business Note and are interested in selling it for a lump sum cash payment, contact Simon Volkov for a free consultation. We are an experienced group of investors who work with you so you can reach your financial goals.
To obtain additional information, provide us with information about your Business Note using our secure form. Upon receipt of your information one of our qualified agents will contact you to further discuss your needs.
Published on September 05, 2007 at 12:13 PM | Comments: 8