In the process of selling a small business the issue of financing a sale is usually pre-eminent in determining if a transaction gets completed. For a number of different reasons these situations often come down to the seller accepting a promissory note from the buyer for a portion of the sale price. The note is written for a specific term and interest rate the same as a loan from the bank.

Generally banks and other lending institutions consider these types of loans as vary high risk and being generally risk averse these institutions shy away from this type of financial instrument.

Often times the seller accepted the note because it was the only alternative available for selling the business. Even if the seller did not mind taking the note their personal circumstances may change over time requiring them to access cash immediately. In either of these situations the note holder would prefer to have cash now instead of a stream of monthly payments over the course of the term of the note.

There is an alternative to carrying a promissory note available. There are groups of private investors in the market who will purchase these notes, for a discount, from the note holder. The note holder can get the cash they need and relieve themselves from the burden of collecting each month. The investor acquires a financial instrument with a high yield. These investors can also offer several alternatives to the note holder depending upon his/her immediate needs. Transactions can be structured as a partial purchase, split payment, full purchase, or in the case of a note with a balloon payment the investor can purchase the balloon. Many options are available and can be tailored to individual needs.

A small business owner in the process of selling heir business can use this liquidation procedure as an alternative to carrying a note. They can often get the cash that they need rather than loaning out money against the future profits of the business.