Business notes are widely-used to record ownership transfers when businesses are sold, exchanged, or inherited. These documents are necessary for documenting current and previous owner, business assets, and any property being used as collateral to secure funding.

Business notes are of particular importance when sellers provide owner will carry financing. Private financing is being used more frequently because it has become considerably harder to qualify for bank loans.

Any time the owner provides financing, buyers pay loan installments for an established amount of time. Owners usually don\’t provide full financing. Instead, buyers finance part of the purchase through a bank or hard money lender. When seller carry back mortgages are combined with bank financing, contracts usually last no longer than 5 years.

It is advisable to obtain legal counsel when seller carry back financing is provided. Lawyers can prepare business notes to ensure proper protocol is followed and file ownership transfers through appropriate legal channels.

Most business notes make use of several documents. The kinds of notes required are determined by the financing methods used. A few of the more common include:

Promissory Note: This form is used to provide a written promise to pay and record details of financing terms including names of all parties involved, purchase price, loan installment amounts and payment dates, rate of interest, and loan maturity date.

Sales Contract Purchase Agreement: This form records information about the purchase transaction including contact info for all parties involved and details of transferred business assets.

Purchase agreements provide written documentation about the sale price, installment amounts and dates, interest rate, and maturity date. These contracts often include a default clause that outlines any late fees, penalties, or consequences that occur if buyers default on the purchase terms.

Security Agreement: This form is necessary for recording a list of all assets being used as collateral to acquire funding. Agreements should provide a description of property; date purchased and amount paid; and make, model, and serial number.

Furthermore, security agreements are prepared to record the duties and financial responsibilities that both parties must perform before moving forward with the sale.

Recorded UCC-1 Statement: Any time business assets are used as collateral, owners must comply with regulations set forth under the Uniform Commercial Code (UCC). A UCC-1 statement needs to be filed so that sellers can reclaim assets if buyers default on terms of the business note.

UCC-1 statements record transfer of property including the seller\’s personal property, office equipment, and business equipment. These forms need to be filed with the Secretary of State office.

Lease Agreement and Assignment: Assignments are necessary when sellers have entered into a leasing contract with a third party. The new buyer takes over the lease and assumes financial responsibility for future payments. Lease assignments release the seller from the contract.

Lease agreements are used when the seller owns the building where the company being purchased conducts business and leases the property back to new owners.

Closing Statement: This form is necessary for documenting transfer of property titles. It provides a summary of settlement costs and identifies the individuals responsible for paying those expenses.

All forms that are utilized to document transfer of business ownership have to include property records, business insurance policies, and 2 to 3 years of business tax returns. All documents and contracts included in the business notes package have to be signed, notarized, and recorded through state agencies.

Learning the correct ways to use business notes is vital to make certain contracts are ironclad in case of default. California note investor, Simon Volkov provides detailed information about the various kinds of notes and how they are used at www.SimonVolkov.com.

Learning the correct ways to use business notes is vital to make certain contracts are ironclad in case of default. California note investor, Simon Volkov provides detailed information about the various kinds of notes and how they are used at http://www.SimonVolkov.com.

Author Bio: Learning the correct ways to use business notes is vital to make certain contracts are ironclad in case of default. California note investor, Simon Volkov provides detailed information about the various kinds of notes and how they are used at www.SimonVolkov.com.

Category: Finances
Keywords: business notes, owner will carry, promissory note, seller carry back financing, security agreement