How To Buy A Business With No Money

When most people consider buying a business, they automatically assume they’ll need upfront cash to get it up and running.

However, many alternative financing options are available to help with business acquisition that new small business owners can turn to for assistance.

This article explains how to buy a business with no money, from seeking small business loans to taking on a silent partner willing to provide money upfront.

How To Buy A Business With No Money (Step-By-Step)

Whether launching a cutting-edge tech startup or opening a local store, buying a business doesn’t mean you need huge sums of money to invest.

Let’s explore the broad range of alternative funding options you can consider to get your next business venture off the ground in no time.

Step 1: Research Industries With Growth Opportunities

The first step in buying a business is to perform due diligence and research the venture’s short—and long-term viability.

This involves investigating the broader market within which it operates to ensure it has potential for growth and ongoing revenue generation.

Some industries enjoying growth include artificial intelligence-based services, health care, and green energy, all of which are in high demand.

At the same time, growth opportunities can be highly localized, for example, opening a store in a new shopping center with high foot traffic.

While it’s difficult to analyze growth with absolute certainty, many industry-based outlets offer insights into market trends that can be read.

By examining the data and determining which trends have true staying power, you can more effectively decide the best course of action for your business investment.

Placing this in the context of other factors, such as successful business models and operating costs, can further help identify a potential win-win deal.

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Step 2. Identify A Suitable Existing Business

Once you’ve decided on the type of business you want to purchase, it’s time to identify one that matches your criteria and purchase price budget range.

The research phase will allow you to create a shortlist of potential businesses in your niche, whether a subscription business or a brick-and-mortar outlet.

Additionally, you can consider attending business conferences to rub shoulders with people who are experienced in the field and can offer actionable advice.

This will give you a headstart on selecting an established business with a successful track record and increase your chances of getting the necessary financing.

The more details you can gather, from the cost of maintaining business operations to the potential profit margins, the higher your chances of attracting investors.

You can also consider purchasing an underperforming business that has been mismanaged, provided you can demonstrate its growth potential.

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Step 3. Explore Seller Financing

Seller financing, sometimes called owner financing, is a popular method for raising enough money to buy a business.

Responsible for a large percentage of small business purchases, seller financing involves the seller receiving a percentage of cash flow as the new owner takes over.

This agreement is typically restricted to a predetermined period and serves as an effective transition between the old and new management.

Ultimately, the business buyers are then responsible for paying off the remaining balance with a combination of a down payment and staggered installments.

It’s a great way to get a solopreneur business or smaller venture off the ground, provided you stick to the financial benchmarks established from the outset.

Interest rates are based on the current rates set by the Small Business Administration, so check to see how these rates might impact your financing and business plan.

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Step 4. Invite Silent Partners

Collaborating with a silent partner is another popular method for business acquisition, but it is limited to providing capital for the venture.

A silent partner takes a hands-off approach to the acquisition and operation, putting up the cash needed but not participating in operations and management.

While silent partners may offer advice and can assist with financial security, they take on limited liability should the venture fail to succeed.

Aspects of the business, from updating the online presence with a website design timeline to rebranding, are outside the remit of silent partners.

Should the business become viable and profitable, the silent partner will receive a share of the revenue as passive income.

Passive investors will require a formal written agreement before providing the finances, typically a contract that includes terms for buying out the ownership stake.

Step 5. Consider Traditional Bank Loans

Perhaps the first source of financing that people consider when considering buying a business is to turn to traditional bank loans for money.

Many of the best small business ideas have been launched with bank loans, which offer stability and peace of mind when transferring ownership.

Bank loans offer financing at stable interest rates fixed over a predetermined time, with the average APR ranging between 4% and 20%, depending on the loan type.

These rates can be impacted by various other factors, such as the specific terms of the loan, additional fees, and the applicant’s credit history.

Banks will likely require access to various data points before making a decision and contextualize the purchase price with other information before approving the business loan.

It’s essential to shop around to see which lenders offer the most competitive business loans, comparing rates and other terms for the best deal.

You can also improve your chances of getting a business loan by paying down your other debts, offering a personal guarantee, and putting up assets as security.

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Step 6. Reach Out To Venture Capitalists

Venture capitalists invest in a broad range of businesses, from those in the early stages of development, such as startups, to existing companies with growth potential.

If you’re looking into buying a business, you should take the time to understand how venture capital works so you’re aware of the costs and processes.

Venture capitalists often buy a stake in a business and help nurture its growth, contrasting to silent partnerships with greater involvement in the project.

They look for scalable business ideas that can compete in the market, increase cash flow, and have a viable business model for ongoing revenue.

As such, you should ensure the business you intend to purchase has an existing strong management team and a clear grasp of the products or services it provides.

Venture capitalists typically take a larger cut of profits due to the potential risk of their investments and the uncertainty surrounding their success.

This expectation of a significant return on their investment can be off-putting for some, making investments from venture capitalists based on rigorous assessments.

That said, they can provide substantial amounts of capital that allow for the rapid scaling and expansion of an existing business, which other financing can’t match.

Venture capitalist firms also take a long-term view compared to other sources of financing, which can be especially helpful when launching new products or services.

Step 7. Use Acquisition Financing

If you’re already a business owner and want to use the company to access financing for additional business acquisitions, acquisition financing is a viable option.

Acquisition financing has been frequently used to obtain large sums of money upfront and a line of credit based on an existing business’s financial statements.

It is sometimes included in the process of applying for a traditional business loan, eliminating the need to use one’s own money for the purchase.

The existing business needs to demonstrate a steady stream of revenue with sustained profits and high-value assets as collateral.

This will allow the business owner to access the funds required immediately, with few transaction delays and minimal administrative duties.

Seller financing and business acquisition loans are aspects of acquisition financing, as are joint ventures and private equity investments.

As such, it offers an impressive degree of scope and flexibility that allows those with an existing business to set up a new business with no money.

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Step 8. Partner With Business Brokers

Buying a business with no money can be a complicated process involving financial understanding and the legal conditions necessary for success.

If you’re unfamiliar with the process’s details, partnering with business brokers is vital to avoiding costly mistakes down the line.

Business brokers are professionals with experience in various fields, from business-to-business industries to specific market sectors.

They also bring to the table previous experience finalizing business deals and the relevant tools needed to evaluate the business you want to purchase effectively.

In addition to correctly filling out and submitting the required paperwork, business brokers can help you secure the best price for the business acquisition.

They typically work on a commission basis, usually as a percentage of the transaction proceeds, which can vary between brokers.

Business brokers are also subject to industry regulations, although these may vary between states, so research the specifics in your jurisdiction.

Other benefits, including knowledge of legal and tax implications and cost-saving measures, can make them invaluable when buying a business.

Step 9. Acquire Investment Through Crowdfunding

Crowdfunding has a broad range of applications for raising capital, from new businesses developing cutting-edge tech to bringing in money for purchasing a business.

Platforms such as Kickstarter have an impressive project success rate, reflecting the increasing viability of crowdfunding as a legitimate source of capital.

It works by seeking small or large donations from the public space and outlining the business’s unique selling points and benefits.

Each donor can be offered incentives that reward them for their donation, such as discounted prices, free products, or access to the business’s services.

You can also offer to repay donors for their investment if the business proves successful and generates high profits.

Promoting crowdfunding initiatives is also straightforward and doesn’t have to cost excessively to deliver impressive results and engagement.

This can include capitalizing on your existing business’s social media presence and spreading the word to customers about your proposed expansion.

It’s a great way to bypass traditional financial institutions and their associated interest rates and raise money directly from potential customers instead.

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Step 10. Sell Off Assets

Lastly, selling off any assets you have is another funding option that can be helpful when getting the money needed to buy a business.

You can sell personal assets such as vehicles, second homes, and other valuables or assets from an existing business.

Business assets can be categorized as tangible and intangible, ranging from intellectual property to machinery, office equipment, and unwanted stock.

Higher-value assets, such as property and real estate or fleets of trucks and other vehicles, can also be sold to acquire the necessary capital to purchase a new company.

Depending on the nature of your existing business, intangible assets can bring in large sums of money that can be reinvested in your next company.

Some examples of potentially high-yield intangible assets include trade secrets, licenses, franchises, and selling an established brand to investors.

The benefit of selling off assets is the ability to carefully select which assets you want to sell, meaning you can portion assets from an existing business without closing it down.

This means you can gain funds for smaller business projects, such as a new side hustle, while retaining existing income streams.

The result is an additional flexible source of cash flow that can be used along with other financing options to cover expenses and other costs.

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Summary

Launching your own business can be stressful, but getting the money needed to succeed allows you to focus on building customer interest and achieving success.

By using one or a combination of the funding options outlined in this article, you can maximize your chances of becoming a long-term business owner.

The more new businesses deliver high-profit margins, the more assets you can use to set up your next income-generating business and drive future success.