The Business Note Purchase Quote Request

What Is Required For A Business Note Purchase Quote Request?

Once you have decided to sell your seller-financed business promissory note and you have chosen a business note broker or funding source to work with, the next step is to obtain a quote for your note.

There will be a series of questions to answer or pieces of information you will be asked to provide to determine if your business note can be purchased and for what amount.

Depending on how your business note broker or funding source works, you could be asked to provide this information through an online form or you might be able to just give the information over the phone or through an email.

Requested Information

The following list describes some of the more common items of information that you will most likely be requested to submit with a business note quote request.

Since different funding sources may have different criteria for funding business note purchasing deals, some items include general guidelines for what business promissory note buyers would probably be looking for.

1. Sale date of the business purchase.

2. Full purchase price of the business sale.

3. Cash down payment paid at the time of business purchase closing.

4. Amount of the note that was created at the time of the business purchase.

The total of the down payment and the note amount should add up to the full purchase price.  In other words, the business note you are trying to sell should be a first-position note.

5. Amount of seasoning of the note. 

Seasoning is the number payments already paid on the note.

The higher the amount of seasoning on the note, the potentially more money you could get for your quote.  The note buyer is looking to minimize risk.  Any proof that a note payer has been able to keep up with a certain of payments is a plus in the view of the note buyer.

6. Interest rate of the business note.

The higher the interest rate, the potentially more you could get for your note because of the higher the potential profit for the note buyer.

Also, the note should generally not be a zero-interest rate note and it should not be an interest-only note.

7. Term of the business note.

The note should be payable within 5 to 7 years.

Also, business note buyers will more than likely prefer notes that are amortized over the life of the note.  Business notes with balloon payments are usually going to be a little tougher to sell.

8. Cash flow information of the business that was sold.

This information includes the average annual revenues and average annual expenses of the business.  

Some business note brokers and funding sources may even request that you provide copies of business tax returns for the last couple of years before the business was sold since good cash flow is something that seems to be constantly increasing in importance to business note buyers.


Related Articles:

How to Sell Business Notes

Learn the steps involved with selling a business note.

The Underwriting Process

Learn what documents are involved with the underwriting process during a business note purchase.



 

 


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