Marketing for Business Notes
As with any type of note, there are several strong avenues to market for business notes and mortgage note buyers. Some will be costly, some will cost nothing but your time (which is a valuable commodity that is not to be wasted or taken for granted). The key to be successful is to strike a balance between the two, based on your budget (or lack of one) and the time you have available for one-on-one marketing, networking, follow-up, etc.
It’s not necessary to take out expensive ads in numerous publications to establish an effective marketing campaign. A key point to remember is that ADVERTISING is not MARKETING. Advertising is a form of marketing. Don’t get the two confused.
When considering a marketing and business plan for your cash flow business, it’s important to understand the industry as it pertains to business notes and mortgage note buyers (or whatever note type you’re pursuing for that matter). The better you understand your prey, the better prepared you’ll be for the hunt. As the saying goes, “…only an idiot brings a knife to a gun fight.” Understanding why business notes are created is just as important as knowing where to market for them. One will lead to the other.
Knowledge is Power
Mortgage note buyers realize the banking industry is curious. We’ve experienced record low interest rates in 1998 and ’99, but the ability to qualify for financing is as hard as ever. As a result, very creditworthy individuals are turned down for traditional financing everyday. This isn’t necessarily due to bad credit. Self-employed, just moved to the state and do not have two years of local state tax returns, starting a new job, etc. are all reasons banks will turn very creditworthy applicants down. This is even more prevalent when it comes to borrowing money for the purchase of a small business. Most banks do not make small business loans regardless of the full page ads some banks run in USA Today boasting they’re the “Friends of the small businessman.” If there’s so much money available the following would not be true:
80% of the small business sales in the U.S. are seller financed…80%!!
Every seller of a business will tell you that nine out of ten prospective buyers that have come through their door have asked if the seller would be willing to carry some of the financing. Initially, sellers are hoping for an all-cash buyer. Eventually, they come to the realization that if they are serious about selling the business, they will have to become the bank. They take a down payment from a buyer and agree to allow the balance to be paid over time. Problem is, most sellers are like you and me…entrepreneurs. Although the monthly payments are nice for a while, eventually the noteholder realizes the reason he was selling the business in the first place was to buy that other business down the road. The down payment he received from the sale is not enough to buy that business (unless that seller will carry the paper which is an invitation for you to go talk about that note too!!) and he needs cash. It’s a vicious cycle.