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Starting a business is every entrepreneur’s dream and a great way to generate revenue away from the nine-to-five doldrums. However, there is the catch; having the capital to finance it and the pain-stacking process of building it from scratch. Fortunately, that isn’t the only way to own a business. One way is buying an already established business, and it only gets better; you don’t need cash on hand to do so. All it takes is having the right business brokerage firm to guide you through it, and you’re good to go. 

How to Buy a Business with No Cash on Hand

When buying a business, especially with no money, there are specific steps and strategies you can take to help you come out ahead. Below are some of them:

Finding the Right Business

This involves two things; choosing what type of business you would want to buy and finding a business that you can buy without cash at hand. When considering the former, it is best to consider choosing a business you would like to be involved with since you would have to run it eventually or be affiliated with it. 

When finding the right business to buy without cash on hand, there are particular businesses you would consider. They include:

The business owner is ready to get out

It would help if you found a business owner that is highly motivated or desperate enough to sell their company and forgo upfront payment. Researching on the owner, the business’s condition or the reason for exiting can provide insight on how best to approach. An example would be where the owner is considering retirement due to health issues and can opt for a steady flow of income instead of a buyout.

Underperforming businesses

There is a better chance of convincing an owner whose business is barely profitable or losing money to sell you their business with no money down. All it takes is excellent interpersonal skills to convince them and outstanding management skills coupled with experience to turn the business around.

Creative offers

These types of businesses provide a unique opportunity for one to come up with creative offers to present to the seller without actual finances. These offers include:

• Pay-On-Performance Model – this is where the buyer pays the seller an agreed-upon amount after attaining a specific performance benchmark.
• Shares Only – this is where the owner makes you part-owner with the option of buying more shares as you grow the business until you become the primary owner.
• Sweat Equity – this is when you work for free, handing over all profits to the owner until the purchase amount is paid in full.

Obtaining funding

After finding the right business and actual finances are required to purchase the business, the next step would be acquiring finances. Below are some of the avenues you can get funding:

Owner/Seller Financing

This is where instead of getting a bank loan, the owner or seller of the business extends you a loan for the purchase with all the terms of the agreement written down on the purchase contract.

Small Business Administration (SBA) Loan

An organization known as SBA specializes in helping people purchase small businesses and boasts of having relaxed requirements and lower down payment compared to traditional banks.

Investors

Obtaining investors to back you after convincing them of the business potential is another way of acquiring funding. This involves developing an exemplary business plan to back you up and show the business’ potential for profit.

Closing the Deal

To avoid future complications, purchasing a business without money requires proper structure and documentation. It is advisable to find a professional to help you with negotiations and due diligence before closing the deal.

Speak with an Expert Before Pulling the Trigger

Buying a business, especially without financing, can be stressful. Consulting a business brokerage firm such as Murphy Business Brokerage can go a long way in easing the process. Murphy Business will provide the necessary services and assistance to help you purchase a business even with no cash on hand. 

When you need sound advice, a strategic plan, and tactical implementation to buy or sell a business, reach out to us. Call us at (727) 725-7090 or (888) 561-3243 or fill out the contact form today to connect with your local office.