The Truth About Buying a Business with No Money Down
There are myths about buying a business with no money down that I wanted to discuss in this post. It is possible, but that doesn’t mean it’s risk-free. The definition of an entrepreneur is “a person who organizes and operates a business, taking on greater than the typical financial risk.
My Experience
My experience is that a personal guarantee or secured assets are part of most deals I have seen or been part of. There is nothing wrong with taking calculated risks. No bank or person will want to loan money to anyone that doesn’t have a high likelihood of repaying the loan. If you can’t create a business plan that clearly shows how a company you are acquiring will pay back any debt should be disqualifying. Good deals will attract capital if the business idea is good. Here are six ways for buying a business with no money down.
6 Ways for Buying a Business With No Money Down
- Use assets you already control: Use investment property, home equity, retirement accounts, or anything you can leverage to get enough for a down payment.</l
- Get seller financing: Demonstrate you have the skills to operate the business and re-pay a seller note and any other debts you incur when you purchase the company. A business plan detailing the use of funds and how you plan to run the business can help here.
- Personal loans: Personal loans are easy to get based on your credit score alone. This loan can be a good source for a down payment. The interest rates tend to be higher, but you can refinance with better terms after you acquire the company.
- Get outside investors: Everyone loves passive income that offers a better return than banks which are currently around 4.0%. You can offer a return greater than 4.0%, and you give investors a reason to work with you. A business plan helps here too.
- Exchange equity for capital: Offer a percentage of your company for equity in your company.
- Business loans: There are many types of business loans, including Small Business Administration (SBA) loans and other products, but they tend to take longer to get and require the most paperwork.
Minimizing the Risks When Buying a Company
Some might say entrepreneurs are risk-takers, which is probably true, but the risk can be minimal if you have the knowledge and take the proper steps. “Skydiving is also considered dangerous, but using a parachute and proper training minimizes the risk. The odds are 99.7% in your favor by taking standard precautions.
Buying a Business Workshop
Skydiving and business are the same in that risk can be significantly reduced by knowledge and preparation. I do webinars every couple of months on buying a business with little or no money. Join me at my next workshop, where I lay out a blueprint for purchasing a business.
