Are you willing to purchase a business, but you don’t have money down? If yes, then this could be a waste of time. This is mainly because a great business does not come cheap. However, you can leverage into a small business with a relatively small or no money down by using some of the suggested strategies given below.
1: Seller Financing
It is probably the most popular and effective option that you can use to purchase a business or a company with borrowed finance. If you opt for this seller financing, you will have to sign a promissory note to the current owner or seller for the borrowed amount, specifying the collateral that you are going to use. In most cases, collateral assets may include the term of the note, capital assets of the business, and the interest rate charged. Business notes can be sold to those purchasers who want to purchase these notes after closing the sale deal.
2: Banks or Micro-Financing Institutes
It can be difficult to secure financing from the banks or niche business lenders. But this option is becoming more popular and available. Potential buyers can obtain funds from the approved lenders of SBA. The best thing about these loan programs is that they are available for both buyers and sellers. Before you apply for SBA loan program, you should bear in mind that you’ll need to include a good amount of paperwork in your loan application. Also, you’ll have to meet the strict eligibility criteria of SBA loan program and check: http://www.turnerbutler.co.uk/sellingbusiness.html
3: Get Help from Vendors
You can get lending help from vendors. This is a good idea and you can use it to your benefit. Simply look in the payables file of the company you want to buy. These files will give you information about the vendors that supply products and services to the company being sold. These vendors can help you in exchange of any incentive, such as you can allow them to continue selling their products and services under the new ownership. It is a win-win deal for everyone – you will need less funds to close the deal and vendor will get business from you.
4: Earn Out Agreement
This agreement is used to bridge the gap between the buyer and the seller when they don’t come to an agreement on the value of the business in question. This agreement is a good way to obtain extra financing. This agreement allows you to pay a smaller down payment.
In addition to these financing options, potential buyers can use many other options like inventory on consignment and angel investors etc. If you want to use any of the aforementioned options, it is strongly advised to educate yourself about these options first. This will help you choose the best option for you and buy a great business with no money down. One important thing to note is that you should be prepared to do some legwork if you are interested in using these strategies.