Buy and Sell debt portfolios online

What is a business note?

Fact checked
Read time:

This text has undergone thorough fact-checking to ensure accuracy and reliability. All information presented is backed by verified sources and reputable data. By adhering to stringent fact-checking standards, we aim to provide you with reliable and trustworthy content. You can trust the information presented here to make informed decisions with confidence.

Table of contents
Key takeaways:
A business note is a legal document that represents a promise to pay a specific amount of money at specified intervals over a set period. Often used in the sale of a business, it outlines the terms of payment between the buyer and the seller and can act as a form of financing for the transaction.

Business notes explained

A business note is a legal agreement in which one party promises to pay another a fixed amount of money. It is frequently used when the seller provides financing for the buyer, also known as seller financing. The note will contain, among other things, the amount of the down payment, the interest rate, and the term of the loan. Small firms may find business notes to be a beneficial source of financing, but it is crucial to verify that they are correctly formed and legally enforceable.

What is a business note?

A business note, also known as a promissory note or a commercial note, is a legal contract in which a borrower pledges to return a lender a certain sum of money within a specified period of time. These notes can be used for financing the acquisition of a business, a piece of equipment, other capital expenditures, or even selling student loans.

The principal amount of the loan, interest rate, payment schedule, and any penalties for late payment or default are often included in business notes. In addition, they may provide details regarding the collateral utilized to secure the loan, such as a lien on the property or equipment being financed, or on the student loans being sold.

Typically, a down payment is necessary to acquire a business note, and some lenders may offer seller financing, in which the seller of a business or piece of equipment instead of a typical lender provides the financing. When forming or entering into a business note arrangement, especially one involving selling student loans, it is crucial to get legal counsel as business notes can be complicated legal agreements.

What is a seller-financed business note?

A seller-financed business note is a legal instrument outlining the details of an agreement between a seller and a buyer. In this sort of arrangement, the seller offers financing to the buyer for the acquisition of a business or other assets. The buyer promises to repay the seller with interest over time, and a down payment may be required. The conditions of the note are negotiated between the parties, but compliance with applicable laws and regulations must be ensured. In some cases, seller-financed business notes can be a beneficial instrument for both buyers and sellers.

What to include in a business note

It is essential in seller financing agreements and other business transactions. It is essential to include all pertinent information and comply to legal standards while writing a business note. These are some essential components of a business note:

  1. The business note must include the borrower's and lender's names and contact information.
  2. The loan amount, the interest rate, and the payment schedule should be specified in the payment terms. It should also specify when payments are due and whether a grace period is granted for late payments.
  3. If the loan is secured, the collateral must be listed on the business note. This may consist of property, equipment, and other assets.
  4. The business note should specify what defines a default, such as missed payments, and the repercussions of default. It should also describe the borrower's options for rectifying the default.
  5. It is essential to establish the state legislation that controls the business note. This can aid in avoiding misunderstanding or legal conflicts.
  6. Signatures: In order for the business note to be legally binding, both parties must sign it. Also, the note should be notarized to prevent fraud.

Ultimately, a well-written business note may give both parties to a credit arrangement with clarity and security. It is essential to include all pertinent information and adhere to all legal regulations to avoid any problems in the future.

It is possible to sell business notes

Yes, it is possible to sell business notes. Selling a business note means that the holder of the note transfers the right to receive future payments to a buyer in exchange for a lump sum of cash. This can be a useful option for note holders who would like to free up cash for a new investment, for example, or who would like to remove the risk of non-payment from their portfolio. The process of selling a business note involves finding a buyer, negotiating a fair price, and transferring the note to the new owner. It's important to work with a reputable note buyer to ensure a smooth and legal transaction.

Who buys business notes?

Many investors, including individuals, businesses, and financial organisations, can purchase business notes. Some investors buy and sell business notes, while others may do so as part of a larger investing plan. In order to diversify their portfolios and create revenue, institutional investors such as banks and insurance companies frequently acquire business notes. Buying and holding business notes may appeal to private investors due to the possibility of greater returns. In the end, the market for business notes is governed by supply and demand, and the availability of interested purchasers might vary based on the unique qualities of the note.

What are the benefits for buyer and seller?

Business notes can be beneficial to both the buyer and seller. For the seller, offering financing through a business note can help attract more potential buyers, as it can expand the pool of buyers beyond those who can secure traditional financing. This can result in a quicker sale and potentially a higher sale price. Additionally, the seller may be able to earn interest on the note, providing a source of passive income.

For the buyer, obtaining financing through a business note can be advantageous if they are unable to secure traditional financing through a bank or other lender. This can provide an opportunity to acquire a business they might not otherwise be able to afford. Additionally, buyers may have more flexibility in negotiating the terms of the note, such as the down payment, interest rate, and repayment schedule.

Selling a business note can also be beneficial to both parties. The seller may want or need to receive a lump sum of cash, and selling the note to a buyer can provide that. The buyer of the note may be able to purchase it at a discount, allowing them to earn a higher return on their investment than they would with other types of investments, such as stocks or bonds.

Overall, business notes can be a flexible financing option for both buyers and sellers, providing benefits such as expanded buyer pools, passive income for sellers, and the opportunity to earn a higher return on investment for note buyers.

Full purchase or partial purchase buy-out

The buyer has two primary alternatives when it comes to purchasing and selling business notes: a complete purchase and a partial purchase buy-out.

The entire business note is purchased from the seller in a complete purchase. This indicates that the buyer will assume all future payments and get the whole face value of the note. This option gives the seller with a lump sum payment upfront, as opposed to getting smaller payments over time, which may be advantageous for people who want quick cash flow.

A partial acquisition Buy-out, on the other hand, entails the purchaser acquiring a piece of the business note, often a specified number of payments. The seller will continue to receive payments until the amount acquired by the buyer has been repaid in full. This option allows the seller to collect a portion of the note's face value and future payments up front, while maintaining the remainder of the note and future payments. It also permits the purchaser to invest in a portion of the note rather than the full note, which might be less hazardous.

How Debexpert can help you

Debexpert is an online auction platform that allows businesses to sell their promissory notes to a network of professional note buyers. With Debexpert, sellers can reach a large number of qualified buyers, ensuring they receive the best possible offer for their note. This process eliminates the hassle and expense of finding individual buyers and negotiating with them one by one.

Debexpert's auction platform provides transparency, so the seller can be confident that they are getting the most competitive price for their note. The process is simple: sellers can list their notes on the platform and provide essential details such as the interest rate, the length of the loan, and the amount of the remaining balance. Buyers then place bids on the note, and the seller can select the best offer.

Using Debexpert's online auction platform is a superior option for selling loan notes compared to other means such as brokers, due to its transparency and efficiency. When selling loan notes, sellers can access a large pool of potential buyers on the platform, increasing the likelihood of a competitive bidding process and leading to the best possible offer. In addition, Debexpert's team of experienced professionals can provide guidance throughout the process of selling their loan notes, ensuring the best possible outcome.

What is a business note? | Debexpert
No items found.
Written by
Henry Arora
Head of Business Development

Experienced Manager with a demonstrated history of working in the Fintech/Customer services/Debt Collections industry. Skilled in Management, Debt Collections Sales, Leadership, Team Management, and Public Speaking. Strong operations professional graduated from Madhurai Kamraj University.

  • Fintech/Customer services Expert
  • Public Speaking
  • Debt collection Expert


No items found.

What debt are we selling

We specialize in car, real estate, consumer and credit cards loans. We can sell any kind of debt.

Other debt portfolios for sale

Interested in buying or selling debt portfolios?
Let's connect! Fill out this form 👇