The purpose of this presentation is to show the difference between these classifications. You will easily see the dos and don'ts that should be considered in preparing such notes or attempting to buy or sell them. The Ugly note is usually created when a business is sold in haste or by a quick sale, either of which puts the seller at distinct disadvantages. Legitimate reasons can include sudden illness of the owner, death in the family, wanting to retire, not wanting toexpand to maintain profitability or because someone or some company has convinced the seller to sell to them quickly. The last reason shown is the most dangerous to the seller.
Some notes call for high interest to satisfy the seller, usually suggested by the buyer.
Therefore, the seller stands to lose the majority of his sales price. This can be caused by the inexperience of the buyer who subsequently fails. Or, the buyer may plan failure by diverting the assets of the business to another business and disappear. Conversely, let the buyer beware, because the seller can play the same game. The seller puts up the business for a quick sale to unsuspecting buyers who have some cash.