How to Buy a Business With No Money Down

Can You Buy a Business With No Money Down?

As a business broker I was asked this question practically every week:

The answer is yes and no depending on how you define “buy a business with no money down.” Specifically, it all comes down to whether or not the seller walks away at closing with a down payment.

If you believe that a seller will hand you the keys for nothing more than your IOU Note, you’re in for a big disappointment. On the other hand, if you’re more sophisticated and understand the ways in which you can use the company’s assets to finance your down payment, you will may be able to work out a deal where your personally don’t put any money down but the seller still walks away with a down payment.

If you really know what you’re doing you will use the 75/25 strategy for acquisitions of small businesses. This means that you cut a deal where the seller takes back a note for 75% of the price and you use the business’s cash flow and assets to create the 25% down payment.

So, yes it is possible so long as the seller gets something reasonable at closing like a 25% down payment on the total selling price.

No one says that down payment has to come out of your pocket.

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