Talk to lawyers or accountants that work with local businesses. Talk with the business owners themselves. Even if they aren’t willing to sell, they may know another business owner who is. Read local publications and seek out owners who are nearing retirement age. [1] X Research source
Ensure that you get an attorney who specializes in business sales, not a general purpose attorney. Too much can go wrong with a deal handled by an attorney that’s not specialized in business transactions. [2] X Research source
Keep in mind, though, that almost no business owner is willing to lend 100% of the purchase price. You’ll still need a “down payment. " However, the down payment can be borrowed from another source, meaning that you still get the business without putting any of your own money into it. When a business owner is willing to lend you money to buy his or her business, that usually means two things: The business owner believes in the business The business owner believes that you can manage the business well. That’s good news and points to likely success in your entrepreneurial efforts. However, it can also mean that there is a limited market for the business, thus few buyers. As a consequence, the seller is faced with liquidating the business at a substantial discount.
In this case, you may still need to put some money down. However, you’ll owe the owner a percentage of the intake for several years into the future. This is similar to owner financing, except that the payments to the owner are based on the ongoing success of the business. You also aren’t in debt.
You can try to go to a bank, but usually the process of getting a bank loan for a small business is long and complicated. Bank lenders typically don’t like to be part of a deal that’s 100% financed. Your best option in many cases is to try and find an unsecured personal loan.
Additionally, you could consider issuing preferred stock to various investors (perhaps family and friends) or issuing unsecured debt.
You should always determine how much you can borrow from the owner and additional sources before making an offer on a business. That way, you can be sure that you’ll make an offer that leaves you with some money left over.
You can only do this if the assets aren’t pledged as security to the seller.
In factoring deals, the third party buyer gives the business 75 to 80 percent of the accounts receivable value immediately so that the business can cover costs. The remainder, minus the discount taken by the third party, is given at a later date when the customer payments actually come in. Talk to your banker to be referred to a third party that offers factoring. [5] X Research source Factoring is not cheap capital, and is generally more expensive than a short-term financing arrangement secured by receivables.
Alternately, if you buy a business that takes in a lot of revenue from credit card sales, you might be eligible of a merchant cash advance. [7] X Research source That’s a “loan” where you get an upfront amount of cash but the company that provided you with the money takes a percentage of your credit card sales for a period of time.
