Hi all,
Has anyone explored using a Structured Installment Sale (SIS) to buy a business? This would be an alternative to a traditional seller note.
As I understand it, the idea of a SIS is that the seller receives the note payments over several years via a highly creditworthy intermediary (e.g. MetLife). The buyer/business, instead of paying the seller P&I directly as in a traditional seller note, pays the intermediary a regular annuity premium and the intermediary pays the seller according to an agreed-upon schedule.
By doing this, the seller avoids large capital gains taxes for the year of the transaction and eliminates the default risk of the buyer since the intermediary has agreed to make the payments as a guaranteed annuity. In essence, the intermediary replaces the buyer's creditworthiness with its own.
Would love to know the pros/cons of this approach. How much this type of instrument typically costs, say compared to a 10/5 amortizing seller note with a normal interest rate (e.g. 8%). Also additional legal, administrative fees, etc. Any general insights would be much appreciated. At first glance, this seems like an appealing option. Thanks!
Structured Installment Sale vs. Seller Note

by a searcher from New York University - Leonard N. Stern School of Business
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