It’s been a while since we last posted and we wanted to reach out and remind everyone that we are still very much interested in buying seller financed Business Notes. In fact, we believe that the macroeconomic conditions favor the sale of most seller financed Business Notes.
As you know, interest rates were historically low until last year. While this was great for Note payors, Noteholders were largely unwilling to part with their Notes because they wouldn’t have been able to take their proceeds from the Note sale and earn as high a return elsewhere. As you might recall, CDs were earning less than 0.25% and 2-year treasury bonds were yielding less than 0.75% in January 2022.
When interest rates are higher, noteholders are more likely to sell their Notes. This is because their Notes, originated in 2022 or 2021 (or even before), were cast at a low fixed rate - by selling their Note and reinvesting the proceeds, they can capture higher returns from other assets. What a difference a year makes! CDs are currently earning 4.5% and 2-yr treasuries are right around 4% - keep in mind that investors can earn these returns essentially risk free, while there is no guarantee that the payor will continue to make monthly Note payments. As a result, we think that now is a great time to broker seller financed notes.