One of the questions commonly asked by entrepreneurs is, “how do I pay for a business?” many people out there are willing to buy a business, but one thing that hinders them is financial constraint. A company usually costs hundreds of thousands of dollars to millions, and the majority of people who want to venture into business don’t have millions sitting around to buy one. What they didn’t know is that there are many ways to pay for a business.
Leveraging other people’s money to buy a business through the following ways:
- Equity – You can put together an investor round to buy a business/acquire a company. You can get by with just a few investors – perhaps one or two sophisticated investors.
- Debt – There are different types of debts and one of them is seller financing. If the seller is selling a great business, they will surely be happy to take a note on it. If you are trying to bridge the gap, you could go for as little as 10% or 20%, although, sometimes, it could go as high as 90%. If you turned out to be unsuccessful, then the business goes back to the seller, which makes the seller financing a win-win situation for both the seller and the buyer. If you don’t want to take the seller financing route, then you could go to the next choice, which is the bankers. What’s ironic about bankers is they want to lend you money when you don’t need it and don’t lend you when you need it the most. From a business perspective, if the bank sees that your business is booming, they would be more than willing to lend you money and use your business as collateral. If you have an excellent banking relationship, then this way of lending money for your business might work.
- Small business loans/Small business administration (SBA) loans – It is one of the practical ways to lend money because you can do it with as little as 10% down. All that it takes for you to do is to give your best shot to growing your business using your stupid human trick, the one thing you do better than everyone else.
Buying a business may seem impossible, especially if you don’t have millions in your hand. But just because it is impossible does not necessarily mean that it can’t be done. You have to find ways to fund the business and, most importantly, be strategic. Buy a business that fits your skillset. When it comes to buying a business, you don’t necessarily need to have millions to write a big check. There are instances when buying a business is cheaper and practical than opening a business from scratch.
If you are planning to buy or sell a business or thinking about how to leverage other people’s money for buying a business, do not hesitate to contact Robert Hirsch of Freedom Factory. His company, Freedom Factory, is one of the highly reputable brokerage firms in the country. Robert would be more than happy to help you with your concerns.
Check out the podcast of “How do I Leverage Other Peoples’ Money for Buying a Business?.”