Buying A Business With No Money
Lots of entrepreneurs are increasingly buying business as opposed to starting their own. Buying a business has numerous advantages over starting one from scratch; for example, a purchased business already has a customer base, an established brand, and well trained employees. You may think buying a business has a high barrier to entry, after all it would require a significant amount of capital to purchase a business and keep it running. But, believe it or not, there are ways of buying a business with no money.
Finding a business to buy
Buying a business with no money is quite a bit different than buying a business when you have a lot of capital to throw around. Normally when you are buying a business, you just need to find an owner willing to part with their business either because they are retiring or moving onto a new business venture. But when you have little in terms of finances, you need to find certain types of business owners who are willing to either engage in seller financing or stay on as a passive partner. You also need to make sure you make your offer at the right time, if an owner has a lot of potential buyers and the business is doing extremely well, then it’s going to be harder for a person with no money to make a persuasive offer.
Seller financing
Some business owners are willing to engage in seller financing, what this means is that they will loan you money which you then use to purchase the business. You will then slowly pay back the owner as you (presumably) make a profit off the business. You will sign an agreement with the owner, which will specify how much interest is to be paid on the loan, how often payments need to be made, and what happens if you default on the loan.
There are several advantages to this method. First off, if an owner is willing to loan you money to buy the business, that is a good indication that the business is profitable enough that the owner feels that they can make their money back. One of the biggest risks when buying a business is that you will buy a business that goes under in half a year, but with seller financing, that’s unlikely. So, already one of the biggest fears of entrepreneurs is removed if you buy a business using seller financing. Secondly, if an owner is willing to engage in seller financing, then that means that they have confidence in your abilities and trust that you can keep the business profitable.
The downside to this method is that very often business owners will expect you to run the business for a certain amount of time before you can sell it. So, if your plan is to quickly flip a business and make a tidy profit, seller financing isn’t for you.
Also, it is worth noting that most business owners are not willing to completely finance your purchase; meaning that you will still have to come up with some money on your own. But, that doesn’t mean the original goal of buying a business with no money is impossible. One possible route, is to find an owner that is willing to engage in seller financing, and combine that with a loan from the bank. That way you can still purchase the business, without spending a dime of your own money. If you do want to try and get an owner to completely finance your purchase, you could try offering an extremely generous deal. For example, try offering them a ludicrously high share of the profits, or even offer to run the business for free for a few months. Most owners probably still won’t agree to 100% financing, but it never hurts to try.
Passive partner
Some business owners, especially older ones, just want to retire after decades of working. These owners don’t want to give up their business entirely, but they no longer feel like running it on a day-to-day basis. These types of owners just want to sit back and let someone else run the business, while they get a small slice of the profits. Much like with seller financing, you are probably going to have to put down some money. But, again, you can get this money through a loan, so you still aren’t spending any of your money. You probably are not going to be able to get a small business loan (the process is rather difficult), so you should probably aim for a personal loan.
Outside investor
If all that fails, you can always try and find an outside investor who will finance the purchase of the business and stay on as a silent partner, while you run the business. They will take a cut of the profits while you spend your time running the businesses. Obviously, this is easier said than done, since finding a person willing to invest a business with you isn’t exactly an easy task.
Acquiring extra capital
Okay, but any entrepreneur out there knows that buying a business isn’t all you need capital for. You may need capital to pay off debts, pay employees, and pay utilities. So, if you purchased the business with no money, how do you go about injecting some capital into the business? Well, there are a couple methods. First off, you can use the existing assets in the business to get capital. Look for underused or unnecessary equipment or vehicles that can be sold or rented. You can also use the business’ existing income. If all else fails, you can always resort to taking out additional loans.
Buying a business with no money may seem impossible, but as has just been shown, it is perfectly possible with the right mixture of loans, and seller financing. Buying a business is not for everyone, it requires a lot of financial finesse and a good eye for how to make a profit. But, if you can pull it off, you can make a lot of money and really build a great business.
