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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 of 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, Sovereign Funding Group can make available a lump sum of cash to the seller of the partnership interests in lieu of the seller- provided financing by the selling and exiting partner.

The sell-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 doing 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.

Feel free to contact us anytime for a free no-risk consultation toll-free at (877) 836-4661 or email us if you have any questions.