Seller Carry Back Business Notes

Congratulations! You have sold your business.  You didn’t get all cash like you were hoping, but you did get a nice note secured by the assets of your business and a personal guarantee from the buyer and spouse.  Now, what are you going to do?  

Do you have enough liquid cash for the down payment on a new business, to make investments or pay off personal debts? Can you borrow and use your note as collateral? Have you considered converting the note from the buyer to liquid cash? 

If you are just starting to think about selling your business, and perhaps want to sell it the quickest and easiest way possible, offer to finance the purchase, and plan on selling the note after the closing. If that is your game plan, you need to plan prior to selling, or you may not have a note worthy of selling…

At the minimum, be sure to observe the following. Missing one will cost you later…

  • Get at least 1/3 cash down payment.
  • Be sure the buyer has a good credit rating.
  • Be sure the buyer has sufficient funds in the bank for operating costs and reserve.
  •  Must have a personal guarantee from the buyer.
  • Try to limit the note to 60 months or less.

For an investor to consider purchasing your note, at the minimum they will need copies of:

  • Promissory Note
  • Purchase and Sales Agreement
  • Security Agreement
  • Recorded UCC-1 (Financing Statement)
  • Lease Agreement and Assignment
  • Documented Payment Record
  • Seller’s Tax Returns for previous two years
  • Settlement/Closing Statement

In addition, credit checks will most likely be done on buyer and seller for

  • Private or government liens
  • County and State searches to uncover unpaid debts
  • Review of seller bank statements showing deposits of payors loan payments
  •  Written estoppel from buyer providing terms of sale and promissory note
  • Any pending litigation and their feel for success of the business.

If you sold a bad business, consider yourself lucky! Don’t plan on being able to sell the bad note that went along with it. That is part of the price you paid to sell the business. If you have a good note, there are buyers for it. They will look more closely at the business, and parties to the business than the buyer may have. If you would like someone to contact you regarding selling your note, drop us an email.

Selling your business by providing the financing was a perfect solution at the time.

But… things have changed, and you could use some cash now for:

  • Pay off all of your debts
  • Buy a house–and have no mortgage
  • Invest some portion of the money to earn a fair return every year
  • Guarantee your children’s education
  • Start your own business
  • And more

Some advisors estimate that seller financing was present in as many as 90 percent of all business sales during the bank-credit crunch of the early 90s. While the crunch has eased somewhat, sellers still finance more than half of business sales.

Whatever the reason you had for financing the sale, the payments you are currently receiving are a valuable asset and can be converted today to a lump sum of cash. 


If interested, please contact me.  In the meantime, please fill out the Business Note Worksheet.

Typical Business Note Buying Criteria

First Position Liens Only

Yields starting at approximately 20%…

No Dollar Maximums… “Typical minimum @ $8K-$10K

“Three Way Program” recommended on business note quotes…

Seasoned Notes (twelve payments received to date):

  • 35% cash, out of pocket down payment…(Will consider less down if well seasoned…call to discuss)

  • Same location and proof of business profitability for two years*

-Two years of corporate tax returns/year end profit & loss statements

  • Confirmation that buyer had previous experience in the business in question

  • Minimum 625 FICA credit score Buyer(s)

  • Promissory note must be personally guaranteed by Buyer(s)…will consider corporate notes in excess of $100,000

Unseasoned Notes (Less than four months payment history):

  • Minimum 40% cash out of pocket down payment at closing

  • Minimum 650 FICA credit score on Buyer(s)

  • Same location and proof of business profitability for three years*

-Three years of corporate tax returns/year end profit & loss statements

Confirmation that Buyer(s) had previous experience in the business in question

  • Full Seller Recourse: Seller may be required to provide personal guarantee for the performance of the promissory note, depending on the financial strength of Debtor.

  • Food service businesses (restaurants, bars, deli’s, etc.) require four years minimum of operation at same location, same format.  Certain exceptions may apply (sizable cash down, longevity at existing location, etc.)  Call to discuss.

All business note submissions are subject to underwriting review and approval, and reviewed on a transaction by transaction basis.