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The Top 5 Ways to Finance Buying an Existing Business
Are you looking for innovative ways to finance buying an existing business? Read on to learn about some common ways to finance buying an existing business.
Buying a business
Here are five ways to financing your acquisition
Are you looking for innovative ways to finance buying an existing business? Read on to learn more.
Finance buying an existing business
In a lot of ways, running your own business is the ultimate fulfillment of the American dream. You set your own hours, act as your own boss, and get to spend your days doing something you love. But how can you become a business owner without all the risk that comes along with starting something from scratch?
What do you do if you want to finance buying an existing business?
There are a number of ways to approach business financing. From making arrangements with the seller to getting a standard loan, you can choose the option that works best for you. Read on to learn about some common ways to finance buying an existing business.
1. Seller Financing
Depending on who you’re buying your business from, you may be able to get the seller to finance the sale of the business. Like with a loan, you pay an agreed-upon amount every month for a certain period of time until you’ve paid for the business in full. This gives the business owner a guaranteed source of income for the life of the loan, and it allows you to avoid the initial up-front expense of buying them out.
2. Partnership
If your seller won’t finance your purchase but you want to avoid a traditional loan, you may be able to go into business with a partner. Each of you would pay for a portion of the business, and you would run it together. This effectively doubles the amount of capital you have to invest in this business and gives you some help in running it.
3. Sell Stock To Employees
If you plan on having a number of employees, another financing option may be to sell stock to your employees. You’ll have to organize the business as an S-Corp or a C-Corp, and we would recommend selling non-voting stock so you retain ownership. But this option can get you a huge discount – possibly as much as 90 percent – on the business price.
4. Lease The Business
As with many other large purchases, one of your options with buying a business is to lease it. This will require cooperation with your seller since you will take over running the business and pay them a fee each month, while they still retain ownership. But it gives you time to build up capital in the business before you make the big purchase.
5. Get A Loan
And, of course, a very popular option for financing buying a business is getting a loan. You can get a term loan, a Small Business Administration loan, or asset-based financing, depending on your situation. You can also use a combination of the three to get the right solution you need to buy your new business.
Learn How to Finance Buying an Existing Business
Starting a business is challenging enough, but knowing how to finance buying an existing business is a whole different ball game. There are a number of different approaches that will work, depending on your needs. Talk to your seller and your bank and see which option will work best for you.
If you’d like to learn more about entrepreneurship through acquisition, check out the rest of our site at BizNexus. We have tools to help you buy or sell a business or franchise. Check out our posts about buying a business to start planning your entrepreneurial success today.
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THE BIZNEXUS ROUNDUP
Quick & dirty interviews, war stories & tips from the trenches of business acquisition, growth & sale. We aim for value, efficiency & fun, so you'll walk away with something useful to take with you along the journey of buying, growing & selling a business.
Spend Money to Make It: Financing Options for Buying a Business
If you've found the business you want to purchase, but aren't sure how to pay for it then this guide is for you. Keep reading to get the money you need.
Want To Buy A Business?
Financing Options For Buying A Business
If you've found the business you want to purchase, but aren't sure how to pay for it then this guide is for you. Keep reading to get the money you need.
Financing options for buying a business:
It doesn't matter if you're a solopreneur or a budding business owner who will employ hundreds. Starting a business requires capital.
On average in the United States, it costs a whopping $30,000 to start a small business from scratch. That's averaging out the big guys with the little guys. You can imagine how much some entrepreneurs might be risking on their startups.
If you're unsure how much it will cost to start your business, you can check the estimated cost of your startup with Entrepreneur.com's calculator tool. There's more to consider than you might think.
Once you know how much you need, how are you going to get the money? Like dad says, "money doesn't grow on trees." Let's explore some financing options for buying a business and get you on your way to success.
Angel Investors
If you can snag an angel investor, you're in great hands. These guys know the risk of a budding startup and are willing to take it. They typically own more than $1M in assets which affords wriggle room for more risky investments.
The biggest downside to an angel investor is their need for even more detailed plans. You need to convince them of your credibility. Just because they are willing to take risks doesn't mean they're wanting to throw their money in a hole.
Do your research. Gather competition analysis, create detailed sales and marketing plans. Essentially, show your expertise in your market.
Your idea needs longevity. If you're just sniffing out a trend but don't know how your product or service will fare in the long run, you won't attract an angel investor.
Lastly, be passionate. If you truly believe in your vision, that's infectious. If you've done your research and your idea has a long half-life, go all-in. Your ardent enthusiasm will help lubricate their pockets.
Micro-lending
If you've ruined your credit on previous passion projects, you may not be able to get a traditional loan. If you really think your business will take off, you might try a microloan.
Micro-lenders are another group of risk-takers. But the return on their risk is higher. They charge a higher interest than a typical loan.
How much higher? You could see APR as high as 30% in some cases, although that's rare. No need for collateral either which balances out the high interest rates.
One such example of micro-lending is peer-to-peer lending. Cutting out the gatekeepers gives more people access to small business funds than traditional means provide.
A few examples of P2P lending companies:
Upstart: a group of ex-Googlers started a platform that judges borrowers not on FICO score but on education, academic performance, and work history.
Funding Circle: After the founder's loan was rejected for the 96th time, they created Funding Circle for U.S. and U.K. small business owners.
Prosper Marketplace, Inc.: This is the original U.S. P2P marketplace. It now serves over 800,000 people.
A Few Other Financing Options for Buying a Business
There are a few more financing options for buying a business outside of traditional loans from either the government or the bank. Self-funding is one of them. Tap into your 401ks, use a credit card if you have a large credit reserve, or start a crowdfunding campaign (that last needs a previously existing fan base or really great marketing).
If you're ready to get financed, let us know. We'll show you how it's done.
BizNexus -Learn More From Our YouTube Playlist:
BUSINESS ACQUISITION
Have you checked out our podcast?
THE BIZNEXUS ROUNDUP
Quick & dirty interviews, war stories & tips from the trenches of business acquisition, growth & sale. We aim for value, efficiency & fun, so you'll walk away with something useful to take with you along the journey of buying, growing & selling a business.
Financing the Purchase of an Existing Business: Different Financing Methods to Know
Do you want to purchase a business but don't have the money for business acquisition? Here's all about financing the purchase of an existing business. As such, you'll need to learn the ins and outs of financing the purchase of an existing business on your terms. If you are looking into buying a business on your terms, you'll need to explore all options in front of you. If you have been building your retirement money over the years, this can be a great outlet for acquiring a business. Financing the purchase of an existing business is a strategic move that you need to carefully consider.
Buy A Business Through Financing
Have A Look At Different Financing Methods
Do you want to purchase a business but don't have the money for business acquisition? Here's all about financing the purchase of an existing business. As such, you'll need to learn the ins and outs of financing the purchase of an existing business on your terms. If you are looking into buying a business on your terms, you'll need to explore all options in front of you. If you have been building your retirement money over the years, this can be a great outlet for acquiring a business. Financing the purchase of an existing business is a strategic move that you need to carefully consider.
It's important that you take the proper steps when you are looking to acquire a business.
As such, you'll need to learn the ins and outs of financing the purchase of an existing business on your terms. Thankfully, there are lots of ways you can go about it.
Follow these tips to see which form of financing suits you.
1. Ramp Up Your Own Funds to Allocate
When someone is looking to sell a business, there are countless arrangements that come into play.
The best thing you can do for yourself is to put up your own money if you have it. This way, you call the shots and aren't worrying about crazy interest rates or strict terms.
It's always best to have a nest egg set aside, and you can use this nest egg to your benefit when you decide to allocate some of your own money to acquire a business.
2. Find a Traditional Bank Loan
If you are looking into buying a business on your terms, you'll need to explore all options in front of you.
Getting a traditional bank loan is still an incredible option. Reach out to either a big bank, community bank or credit union to see what sort of loan options you can explore.
Make sure that they are feasible for your budget and that the terms are beneficial to your needs.
3. Talk to the Small Business Association
Be sure that you look into the Small Business Association (SBA) as an outlet when you'd like to get some lending.
These organizations are allies for small businesses such as your own and can help you get your hands on the funding that makes the most sense.
They'll give you access to the financing options that are most conducive to growth so that you are able to expand your business.
4. Use Your 401k to Roll Money Over
You can use your 401k as a tool to fund a business.
If you have been building your retirement money over the years, this can be a great outlet for acquiring a business. The benefit of using a 401k is that you'll be able to do so without the same early withdrawal penalties that you would experience when taking the money out for other reasons.
5. Get Financing Through the Seller
Finally, it also pays to seek financing from the seller.
A number of sellers will offer you ongoing financing at a great rate, which can expedite the sale of the business. Be sure to thoroughly read through the terms to know what you are getting.
Financing the Purchase of an Existing Business: Use These Tips
Financing the purchase of an existing business is a strategic move that you need to carefully consider. If you're in the market for buying a new business, let these tips guide you.
Our company can help you out so that you can find the assistance that you need.
For more information on buying a business on your terms, stay tuned and get in touch with us for more help.
Financing the Purchase of an Existing Business: Different Financing Methods to Know
Do you want to purchase a business but don't have the money for business acquisition? Here's all about financing the purchase of an existing business. It's important that you take the proper steps when you are looking to acquire a business. As such, you'll need to learn the ins and outs of financing the purchase of an existing business on your terms. Thankfully, there are lots of ways you can go about it. Follow these tips to see which form of financing suits you.
Do you want to purchase a business but don't have the money for business acquisition? Here's all about financing the purchase of an existing business.
It's important that you take the proper steps when you are looking to acquire a business.
As such, you'll need to learn the ins and outs of financing the purchase of an existing business on your terms. Thankfully, there are lots of ways you can go about it.
Follow these tips to see which form of financing suits you.
1. Ramp Up Your Own Funds to Allocate
When someone is looking to sell a business, there are countless arrangements that come into play.
The best thing you can do for yourself is to put up your own money if you have it. This way, you call the shots and aren't worrying about crazy interest rates or strict terms.
It's always best to have a nest egg set aside, and you can use this nest egg to your benefit when you decide to allocate some of your own money to acquire a business.
2. Find a Traditional Bank Loan
If you are looking into buying a business on your terms, you'll need to explore all options in front of you.
Getting a traditional bank loan is still an incredible option. Reach out to either a big bank, community bank or credit union to see what sort of loan options you can explore.
Make sure that they are feasible for your budget and that the terms are beneficial to your needs.
3. Talk to the Small Business Association
Be sure that you look into the Small Business Association (SBA) as an outlet when you'd like to get some lending.
These organizations are allies for small businesses such as your own and can help you get your hands on the funding that makes the most sense.
They'll give you access to the financing options that are most conducive to growth so that you are able to expand your business.
4. Use Your 401k to Roll Money Over
You can use your 401k as a tool to fund a business.
If you have been building your retirement money over the years, this can be a great outlet for acquiring a business. The benefit of using a 401k is that you'll be able to do so without the same early withdrawal penalties that you would experience when taking the money out for other reasons.
5. Get Financing Through the Seller
Finally, it also pays to seek financing from the seller.
A number of sellers will offer you ongoing financing at a great rate, which can expedite the sale of the business. Be sure to thoroughly read through the terms to know what you are getting.
Financing the Purchase of an Existing Business: Use These Tips
Financing the purchase of an existing business is a strategic move that you need to carefully consider. If you're in the market for buying a new business, let these tips guide you.
Our company can help you out so that you can find the assistance that you need.
For more information on buying a business on your terms, stay tuned and get in touch with us for more help.
BizNexus -Learn More From Our YouTube Playlist:
BUSINESS ACQUISITION
Have you checked out our podcast?
THE BIZNEXUS ROUNDUP
Quick & dirty interviews, war stories & tips from the trenches of business acquisition, growth & sale. We aim for value, efficiency & fun, so you'll walk away with something useful to take with you along the journey of buying, growing & selling a business.