Private Capital / Promissory Note Structure: Asset backed Financing.
Hey everyone,
I know the core focus here is real estate, but I wanted to tap into this community's experience with private lending, promissory notes, and alternative yield structures. Does this sound reasonable or interesting to you?
My family and I operate a high-demand retail and service business in Wisconsin. We are currently facing a massive scaling bottleneck: local demand heavily outpaces our current stock, but we are only capitalized to hold a fraction of our maximum inventory capacity. Because inventory turnover is exceptionally fast (days to weeks), we could scale rapidly if we had access to dedicated inventory capital. Owner has a 760+ Credit score and has 30 years experience in this industry.
Rather than traditional bank lines, we are exploring private capital and want to run a specific note structure by you all to see how it pencils from an investor's perspective.
Proposed Note Structure
- Return: 13% fixed APR.
- Term Horizon: 5-year maximum maturity.
- Liquidity / Call Option: The lender holds the right to call the principal due at any time, backed by a 4-month written notice window. This gives us a 120-day runway to rotate and liquidate inventory to return principal safely, while locking in a long-term yield for the investor if they want to let it ride.
- Security: Asset-backed via a formal UCC-1 filing on physical inventory.
What I'd Love Feedback On:
- The Terms: For those of you who act as private lenders or use promissory notes, does a 5-year term with a lender-initiated call option (plus a 4-month wind-down window) make this an attractive passive income vehicle?
- Structure & Pitfalls: Are there any hidden friction points or legal considerations with pairing a multi-month notice period to physical inventory collateral that we should watch out for?