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CASH FOR BUSINESS NOTES

Very often, in the process of selling a business , the owner has to take back a note for all or a portion of the price paid to cover his equity position. Story Financial Group has contacts with several investors that will purchase all or a portion of those future payments for cash now.

The price will be a function of the perceived risk of the note. Some of the qualifications and the factors affecting that risk are:

Seasoning Seasoning is the amount of time payments have been received. The minimum requirement is almost always six months and one year or more is preferred. The investors like to see that the new owners have been able to make a go of the business without the original owner. I have seen some special cases close with as little as 4 months, but they are rare. Payments must also have been made on a timely basis.
Equity Most investors will require a minimum of 25% down payment at the time of purchase.
Size of the Note The minimum note value is $10,000 but the investors prefer $50,000 or more. The maximum value for this product is $350,000 from the most respected investor in the field.
The Payor Typically the payor in these transactions is a Corporation or an LLC. The note is considered much less risky if there is also a personal guarantee on the note from an individual with a good credit rating and significant assets.

Also, if the payor has previous successful experience in the new business this can help alleviate the risk.
The Assets Notes that are backed by liens on land and buildings are much less risky than a service business with very specialized assets and tons of goodwill.
The Records Receipts in a shoe box are frowned upon. Investors like to see orderly and thorough records that show the owner is in control of his operations on a consistent basis. Funding will normally require at least two years of previous profit and loss statements (including balance sheet and cash flow statements) and two years of tax filings. If the note has a personal guarantee, the individual will typically have to submit a personal financial balance sheet and the last two years of personal tax returns.

We can arrange for full purchases or partial purchases where you sell only a portion of your total payments or only a portion of each payment for a specified period of time. For a free appraisal on the value of your business note please call toll free (800) 480-3928 or complete our Online Submittal Form.

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