Wednesday, December 21, 2011

Using Business Notes for Financing Pharmacy Acquisitions in Idaho

By Brad MacLiver
Authorship and profile at Google


When acquiring or selling an Idaho 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 an Idaho 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 an ID Pharmacy Business Note

1.  The process of selling a pharmacy or drug store to an individual can be easier and less time consuming when the Idaho 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, an Idaho 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 ID 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 pharmacy business note in ID, frees up capital that can be used for new ventures, or paying off old debt.

5. When an Idaho 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 the terms and interest rate are set and agreed upon between the seller and buyer of the business. A pharmacy valuation performed by a valuation company that has expertise in pharmacy valuations will assist negotiating the purchase price. 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 Idaho 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 ID 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.

Additional Tips for Business Notes:
1. Business notes that have been poorly structured. may prevent their sale. Seek professional guidance before originating a financial instrument that can’t be sold.

2. The sellers of business notes must fully understand the risks of Investors in order to successful sell the business note.

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

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