Managed Credit Ownership Transitions
What is an Installment Sale?
An alternative exit and liquidity solution.
An installment sale, also commonly referred to as “seller finance,” is a transaction structure where a seller acts as the lender for their buyer.
Instead of receiving one lump sum at closing that is subject to tax, the seller is paid in periodic installments with interest, creating a loan.
When this happens, the seller is allowed to defer their capital gains tax until principal is received on the loan. This means that the seller can earn tax-efficient cash flow via interest income on their pre-tax balance.
With installment sales, sellers are enabled to defer their tax liability, automatically step into a predictable income stream from the business they know best, and facilitate access to debt capital for their buyer.
What is a Managed Credit Ownership Transition?
A standardized framework for executing installment sale ownership transitions.
Through Managed Credit Ownership Transitions (MCOTs), we serve as the lender on behalf of sellers who use installment sales to transfer ownership internally.
Arms-length intermediation sets fair terms and durable structures built for success, with potential for liquidity or credit enhancement through a centralized platform.
Why Does Haven Mercer Need to Exist?
Anybody can make a loan, the hard part is actually getting paid back.
With traditional installment sales, millions of dollars are put at risk without a credit professional representing the seller at origination or after closing. This leads to value leakage from day 1, or avoidance of the strategy altogether, despite its potential benefits.
We increase the probability of sellers getting paid back on loans that we originate. Successful outcomes (loan payoff or liquidity) are byproducts of thorough underwriting, structuring, and risk management that begins on day 1.
Liquidity for a privately negotiated asset requires centralized trust and legitimacy, which is exactly what we are building with our approach to origination, servicing, and asset management.