What is Seller Note?
The Short Answer
Seller Note explained simply
A Seller Note is essentially a loan from the seller to the buyer. Instead of the buyer paying the entire purchase price in cash or through a bank loan, the seller agrees to finance a portion of it. The buyer then makes regular payments to the seller, often with interest, over an agreed-upon period. This arrangement can make it easier for buyers to acquire a business, especially if traditional financing is hard to get. For sellers, it can make their business more attractive to a wider range of buyers.
Real-World Example
The Coffee Shop Sale
Imagine a coffee shop is selling for $300,000. The buyer has $200,000 in cash and a bank loan. The seller agrees to provide a Seller Note for the remaining $100,000. The buyer will pay the seller back over five years with 6% interest. This helps the buyer close the deal and the seller gets their full asking price over time.
Why this matters
Seller Notes are important because they can make a business sale happen when it otherwise might not. They offer flexibility in financing and show that the seller believes in the business’s future success. For buyers, it can reduce the upfront cash needed. For sellers, it can attract more buyers and potentially lead to a higher sale price.
A Seller Note can be a powerful tool to get a deal done. It shows you have skin in the game and are confident in the business. Just make sure the terms are clear and protect your interests.
A Seller Note can be a powerful tool to get a deal done. It shows you have skin in the game and are confident in the business. Just make sure the terms are clear and protect your interests.
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