Promissory notes are a type of financing used to make transactions happen. They can be part of a loan agreement, or they can stand on their own as a standalone document.

These types of notes can be sold, and lenders sometimes choose to sell them as a way to raise cash quickly. A note buyer can purchase them for a discount from their face value.

They buy notes for cash

Promissory note buyers buy notes for cash at a discount to the face value of the note. This is usually done to raise a lump sum of cash quickly, rather than waiting for future payments to accumulate.

Promissory notes are legal, and are often used by companies to finance sales that would otherwise be unable to take place. However, these notes can be risky to both the borrower and the lender.

The loan contract that accompanies the promissory note may state the lender’s right to recourse–such as foreclosure–in case of default by the borrower. However, these clauses are typically absent from the promissory note itself.

When a promissory note is sold, it usually gets discounted by 10 to 35 percent from its face value. This is because inflation eats away at the value of the note’s future payments. The amount of the discount will depend on a variety of factors, such as the borrower’s credit rating and the note’s amount.

They offer a discount

Generally, promissory note buyers offer discounts ranging from 10 to 35 percent of the original amount. The discount is based on many factors, including the amount of the note, the interest rate and the credit rating of the debtor.

When buying a promissory note, be sure to do your research. This will help you avoid buying a bad investment.

Be especially wary of a salesperson who claims to be able to pay you a guaranteed return on your money. These claims can be misleading and often involve a hidden commission or other form of compensation not mentioned in the sales pitch.

The best way to determine the aforementioned is to ask the salesperson for specifics. For example, how much of the salesperson’s compensation will be used for marketing or promotional expenses? Or, how much will go toward your actual investment? Those details can be the difference between a high return and a losing investment.

They are a legitimate business

Promissory notes are a form of debt that a company may issue to raise capital. They are sold to investors as a form of investment, and they can offer a higher rate of return than long-term bonds or FDIC-insured certificates of deposit.

However, the SEC and state securities regulators have found that some promissory note sellers are fraudulent. These fraudsters swindle unsuspecting individual investors who are looking for a safe, low-risk investment alternative.

These scams can involve a variety of schemes. Some promise “risk free” returns, while others are based on claims of “guaranteed” or “insured” payoffs.

Some also use money from the sale of new promissory notes to pay off old notes, a so-called “Ponzi” scheme that doesn’t result in investors getting their principal back.

Beware of pushy sales tactics from anyone who sells you a promissory note, even if they are a reputable investment professional. These salespeople can sway you to buy their note investments by telling you they need to act quickly.

They are a good investment

If you’re an investor with a knack for navigating the complexities of debt investments, promissory note buyers are worth a look. They offer a great opportunity to build your own portfolio, and even provide you with a tidy chunk of passive income.

Promissory notes are a type of debt that an investor agrees to loan to a company in exchange for the company’s promise to pay back the principal, plus interest, over a specified period of time. These loans are not usually sold to the public, but can be used by investors as a way to obtain large returns without taking on the risks associated with traditional banks or other traditional lenders.

Be careful when evaluating promissory notes that are marketed to individual investors. Many of these notes are fraudulent, or at the very least misleading. These investments may claim that they are “guaranteed” or insured, but these guarantees are typically issued by foreign insurance companies that do not meet US regulatory requirements.