Promissory Notes • What are Business Notes? • Business notes are created when a business seller decides to help finance the sale of their business. The note usually equals the difference between the sale price of the business and the buyer’s down payment. For example, Tom decides to sell his laundromat for $100,000. He finds a buyer, Jerry, who doesn’t want to deal with the hassles and high rejection rates of the conventional bank loan approval process, so he opts for seller-financing. Jerry makes a down payment of $30,000 and Tom creates a Promissory Note (or Business Note) with an original balance of $70,000. • Once the seller and buyer have agreed to the terms of the financing, they sign the Promissory Note, which acts as a contract between both parties. Once the note is signed, the seller becomes the note holder. Much like a conventional loan, Jerry makes monthly payments at a predetermined interest rate and term. • Did you know that Business Notes can be sold? • We’ll offer the seller a lump sum today in exchange for the Note’s future monthly payments, assuming the Note meets our purchasing criteria. Generally, we need to see that the buyer has made the first two or three monthly payments before we can bid. • We try to offer the most flexible purchase plans. We’ll quote for either all remaining or a portion of the remaining monthly payments. • Small-business seller-financing has become a great alternative to a bank loan. • As we all know, the majority of buyers of small businesses are unable to secure a bank loan. The void left by banks and the absence of any real, easily accessible support from the SBA has created an ideal environment for the creation of seller-financed business notes.