Create Business Notes for Profit

Finding a Viable Business Note Borrower

Creating sellable business notes requires understanding what investors seek. Two critical factors emerge:

Credit Score Requirements: Buyers typically require at least a 625 FICO middle-score or higher as minimum qualification. Higher scores improve offers significantly. We advise verifying scores independently rather than relying on borrower claims.

Down Payment Strength: Borrowers must contribute at least 30% hard, non-borrowed capital to keep loan-to-value ratios manageable and reduce buyer risk. Insufficient down payments may result in partial rather than full purchases.

Include a Personal Guarantee

Corporate borrowers require written personal guarantees. Without one, companies can dissolve to avoid repayment obligations, leaving sellers without recourse. This protection proves the deciding factor in whether a note is funded at all for commercial transactions.

Loan Terms / Loan Amortization for Business Notes

Three structuring principles are emphasized:

Avoid problematic structures: Interest-only arrangements with balloon payments create significant risk since borrowers must refinance through traditional lenders, which rarely approve such requests.

Optimal timeframes: Investors prefer 3-5 year investment horizons. Notes exceeding five-year terms won't qualify for full purchases and face steeper discounts.

Interest rates: Rates should be 3% to 6% higher than what the primary lending market is charging, suggesting 9.5% to 12% depending on borrower profile. Higher rates protect against discounts during resale.

Loan Seasoning

Most buyers do like to see at least 3 to 12 months of seasoning before bidding. Many decline unseasonably originated loans. Amerinote Xchange requires 3-6 payments minimum, though substantial down payments (50%+) may waive this requirement.

Payment Record Keeping

Documentation proving performance is essential. Sellers should maintain canceled checks, bank statements, or deposit slips demonstrating consistent payments. This record cleanliness affects pricing and underwriting outcomes.

Documents and Closing

Professional legal documentation is non-negotiable. Sellers should engage attorneys for notes, purchase agreements, and security agreements. Corners should never be cut to avoid friction, delays, and potential inability to sell the loan.

Frequently Asked Questions