How to Buy a Business with Little Money Down

Can you actually buy a business without collateral?  The short answer is, “No,” but that doesn’t mean you- the buyer- need vast amounts of cash and personal assets to acquire a business.    While it’s true that banks expect to collateralize loans with down-payments and assets sufficient to mitigate their risk, there are other considerations to help qualified would-be business owners.  In this post, we will explore a couple of these. 

First, it’s important to note: there’s a difference between collateral and having no funds whatsoever.  The larger the business you plan to buy, the more money and assets you will ultimately need. However, many main street businesses can be purchased with very little of the buyer’s personal money down.

The SBA offers a lot of assistance to main-street business buyers. The SBA’s 7 (a) program incentivizes banks to make small business loans by guaranteeing a whopping seventy-five percent of the loan amount.   This means that you, as the business owner, only need to have twenty-five percent of the project cost for a downpayment.  Moreover, some of  that twenty-five percent can come from investors,  gifts, or seller financing.  The SBA’s 7 (a) program allows prospective buyers to use money from these sources towards the acquisition.

Are you a woman, a minority, or a veteran?  Do you have special training or certifications?   If so, you may qualify for even more incentives.  We can help you optimize the funds you do have by finding  the most advantageous financing options.

Working with  Business Brokers & Consultants is a massive shortcut in finding the right business and the right financing. 

Don’t be dissuaded by the challenges that a lack of collateral represent, particularly if you have expertise in a particular field.   While lack of significant collateral can be an obstacle, it isn’t insurmountable.  

Copyright: Otis R Florence, Business Brokers & Consultants, Inc.


This article is based on the post How to Purchase a Business Without Collateral which appeared on Deal Studio – Automate, accelerate and elevate your deal making.