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The reason for the sale of a principal's or partner’s interest in a business or professional group can be caused by the death, disability, retirement, or by the preference of one of the partners to leave the business. The interests of the exiting partner's ownership in a buy-sell agreement or a contract can be sold by the exiting partner for a lump sum to a funding source operating in the Secondary Capital Market.
Conventional bank financing for such a transaction is almost nonexistent. As a result, the party leaving the business or the partner’s heirs are required to give seller financing in order to bring about the completion of the transaction.
As an alternative, Capital Funding of America can make available a lump sum of cash to the seller of the partnership interests in lieu of the seller-provided financing by the exiting partner.
The seller-financed portion of the transaction is evidenced by a document called a business note. The business note evolves from the contract to sell the business when the entire cash amount needed to complete the purchase is note available. The business note is given to the seller in lieu of cash just as in the financing of other business transactions. such as a commercial mortgage or equipment financing.
When formulating a partnership sale, it is important that a down payment is made, a personal guarantee from the purchaser is included, a marketable interest rate is provided for in the note, and that tangible assets having commercial value are transferred in the transaction, such as machinery and more importantly real estate. The sale of strictly goodwill is extremely difficult for a funding source to underwrite and to justify the payment of a reasonable purchase price.
If you are about to enter a situation where partnership interests are being transferred, please give us a call immediately so we can help to plan the transaction and so that the selling partner’s interest can be fully funded at the onset of the sale. If the contract has already been executed, we still would be interested in discussing the purchase of the balance of the contract . In this event, the exiting partner could sell off the remaining payments due under the transaction for a lump sum of cash.
For more information on the sale of partnership agreements, call Capital Funding of America at our Toll Free Number 1-800-322-5985 or use this link to our CONTACT US page.
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