Wednesday, December 21, 2011

Using Business Notes for Financing South Dakota Pharmacy Acquisitions

By Brad MacLiver
Authorship and profile at Google


When acquiring or selling a SD pharmacy or drug store, one alternative is to have the seller originate the financing and carry back a business note. At first glance many pharmacy owners will not want to take this approach. They want their cash and their exit. When a pharmacy owner is considering selling their drug store, looking at the benefits of originating a business note and not just the perceived costs, they may find that offering Private Finance in the form of a Pharmacy Business Note in South Dakota will provide them an alternative course of action.

Advantages of Creating and Selling a Pharmacy Business Note in South Dakota

1. The process of selling a pharmacy or drug store to an individual can be easier and less time consuming when the pharmacy seller in South Dakota agrees to carry a business note, than a buyer pursuing traditional financing.

2. By offering Seller Carryback Financing, often referred to as Private Finance, a pharmacy business owner in South Dakota can greatly increase the number of potential buyers for their business, and most likely sell the business at a higher price.

3. When pharmacy business notes are created, several options exist, such as keeping it for monthly income, selling just a part of the SD pharmacy business note to meet current financial needs and keeping the remainder for future income, selling the entire pharmacy note for a large lump sum.

4. By selling either the entire or a portion of the SD pharmacy business note, you can free up capital to use for new ventures or pay off old debt.

5. When a South Dakota pharmacy business note is created and sold, with the proper professional guidance, a transaction can be structured that allows the pharmacy business seller the biggest advantage in achieving the seller’s goals.

When originating a pharmacy business note in South Dakota, the terms and interest rate are set and agreed upon between the seller and buyer of the business. The seller of the business accepts the promissory note, which is secured by the business including any inventory and equipment that belongs to the business. The pharmacy business seller then sells the note to an Investor who is willing to hold the pharmacy note in exchange for compensation. Since Investor can’t go back to the pharmacy business buyer and change the terms of his purchase agreement, the seller of the note must discount the note. The Investor is compensated from the difference of what the note was originated for and the discounted price paid for the pharmacy business note.

Tips:

1. Poorly structured business notes may prevent their sale, so seek professional advice before originating a financial instrument that can’t be sold.

2. Sellers of business notes need to fully understand the Investors risk in order to successful sell the business note.

3. Private Finance, in the form of a Business Note, is an alternative that should be looked at as a business financing option.

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