Company owners looking to sell all or part of their businesses these days often get yanked into helping the buyer with the financing. Seller's notes, frequently written for 10 or 15 years, are sometimes the only option. But what if the seller wants, or needs, to become liquid before the note is paid off?

Until recently, the only avenue for getting cash from notes was to find local investors to buy them out, often at a deep discount. But lately, a broader market has developed. Indeed, one company, Mortgage Buyer Associates (MBA), based in Austin, is now operating through independent agents in more than 20 states and plans to be in most major metro areas by the end of this year. The company draws investors from all over the country, and the discounts it negotiates (generally in the 10%-to-18% ballpark) tend to be less harsh on sellers. Most of MBA's investments thus far have been in residential mortgages of less than $200,000, notes Jerry Hofrock, who is in charge of recruiting new associates. But increasingly, the company has shown an appetite for bigger notes on commercial properties, for which the financing need might be as high as $5 million. In any transaction, the investors give the sellers cash and begin receiving the regular monthly payments from the current owners.

How do MBA's underwriters decide if certain notes are worth buying -- and what they're willing to pay? Among the considerations: the valuation of the property, the amount of equity the new owner has in it, the location, and the owner's payment history. The lower the risk, Hofrock says, the less a seller's note is discounted, though the smallest discount is about 10%. -- Bruce G. Posner

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