News and Tips on structured settlement transfers.


Selling a Business Note

If you owned a business and sold it, the purchaser may have given you some cash and a note for the balance.  If you’d rather not wait for payments and want to sell that note now, you can exchange some or all of the future payments in exchange for a lump sum up front.  Like a sale of a structured settlement or lottery award, you will receive less in total than you would have over time, but if you need cash right away, this may be a good option.

When considering what your business note might be worth, prospective buyers consider many factors, including the following:

Note Terms.  The longer the term of your note, the less it is likely to be worth to a purchaser; they don’t like to wait for their cash, either. Five years (60 months) appears to be a rule of thumb, investors don’t like to see longer terms than this.

Interest Rate.  Of course, prospective buyers stand to make more money on a note with a higher interest rate, and will pay more for it. 

Down Payment.  A larger down payment made when the buyer purchased your business indicates a stronger business and a more creditworthy note payor. 

Business Characteristics:  Is this business in a growing field?  How established is it?  How strong is its client base?  How have sales been lately?

Assets.  The business is the collateral for the note, but what does the business own?  Does it have strong financials, a good cash balance, and valuable underlying assets? 

Liabilities.  The prospective buyer is certain to check for other potential claims against the business, such as loans, lawsuits, or tax liens. 

Seasoning.  Investors often like to see that one or two payments have already been made against the note; this is referred to as “seasoning.”  A successful payment history suggests that default is less likely in the future. 

Should you enter into an agreement to sell your note, you’ll need to assemble documents for the buyer. 

Notes and Contracts:  You’ll need the actual promissory note you received, and the contract for the sale of the business. 

Security Agreement:  This is the contract that demonstrates your interest in the business itself if the payments aren’t made on the note – in other words, it proves your collateral.

Proof of payments made on the note to date.

Financial statements and/or tax returns for the business.

This is a short list, of course, and you may be asked for much more.  Bottom line is, the prospective buyer will want lots of assurance as to the strength of the note.

If you need help selling your structured settlement, annuity or lottery payments,
contact us today. We are here to answer your questions and help you obtain the
highest possible price for your payments.

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