Wednesday, December 21, 2011

Using Business Notes in California for Financing a Pharmacy Acquisition

By Brad MacLiver
Authorship and profile at Google


When acquiring or selling a CA 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 California 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 will provide them an alternative course of action.

Advantages of Creating and Selling a CA Pharmacy Business Note

1. The process of selling a California pharmacy or drug store to an individual can be easier and less time consuming when the pharmacy seller 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 CA pharmacy business owner can greatly increase the number of potential buyers for their business, and most likely sell the business at a higher price.

3. When a pharmacy business note is created there are the options of keeping it for monthly income, selling the entire pharmacy note for a large lump sum, or selling part of the pharmacy business note to meet current financial needs and keeping the remainder for future income.

4. Selling either a portion, or the entire California pharmacy business note, frees up capital that can be used for new ventures, or paying off old debt.

5. When pharmacy business notes are created and sold, transactions can be structured that allows the pharmacy business seller the biggest advantage in achieving the seller’s goals with the proper professional guidance.

The terms and interest rate are agreed upon and set between the seller and buyer of the business when originating a California pharmacy business note. The seller of the business will accept the promissory note, which is secured by the business.  This includes any inventory or equipment that belongs to the business. The pharmacy business seller sells the note to an Investor that is willing to hold the pharmacy note for compensation. Since Investors cannot go back to the pharmacy business buyer later and adjust the terms of their purchase agreement, the note seller must discount the note, which compensates the Investor from the difference of what the note was originated for and the discounted price paid for the pharmacy business note in CA.

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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