Definition - What does Seller Note mean?
When companies do not have sufficient assets to securitize senior debt, buyers will provide the seller with a note bearing a set interest and terms of repayment. This strategy essentially results in having the seller self-finance all or part of the transaction.
Divestopedia explains Seller Note
However, a seller holding the note must ensure the interest rate is sufficient to make up for the company's risk profile and its potential inability to generate free cash flow to service and pay off the debt. A seller is better off requiring a set principal repayment schedule which, if not met, would allow the debt to convert to equity through the exercise of an equity kicker.
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