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26 Replies Latest reply: Jan 21, 2010 3:49 PM by kivschil RSS

No Money? No Problem … Buy A Business With $0 Down

Expert
Currently Being Moderated

No Money? No Problem ... Buy A Business With Zero Down ($0 from your pocket)

 


I could tell you that there are many "little secrets" that sophisticated business buyers and investors keep to themselves to buy good businesses without using their own money and that now for the "first time" I'm going to disclose them to you ("at the risk of making them mad; but the world has to know" ... right ... what BS ... it always makes me smile when I read it.).

 


But it's not like that at all.

 


Most sophisticated and experienced business buyers and investors (and I've talked, worked and dealt with hundreds) are good people; professionals that have learned through experience and don't mind talking about it and sharing their knowledge.

 


The thing is, most people don't know someone like that, and if they don't know them ... how can they ask them about buying businesses and the best way to do it if you have a limited amount of capital?

 


There are a lot of good books out there on buying a business. They are a great resource for those people who have a lot of cash on hand to buy a business.

 


They are also great reference materials for those out there that want to buy a business but may not have the money to do it. But frankly it is not going to be much help to them since they do not have the money to buy a business the way that most people think is the only way to buy a business. But there are other ways and you can buy a good business without using your own money for the down-payment. This has been proven for decades time and time again!

 


In my previous posts I talked about why and how this works (please read them if you have not had a chance to yet):

 


5/22 - How to buy a good business without using your own money - Part 1 - Why This Works

 


5/22 - How to buy a good business without using your own money - Part 2 - How This Works

 


Most people think that they have to have a lot of their own money to buy a business.

That is just not true.

It does take money to buy a business but again we're talking about learning how to use other people's money ... not your own!

Perhaps you have another question like "I've heard that it is very hard to find money to start a business ... why would someone provide money for me to buy a business?"

 


Here's why:

 

  1. It is cheaper smarter safer and much faster to buy a good business rather than to start one.
  2. Established businesses have proven revenues and cash flow.
  3. They have existing customers and supplier relationships.
  4. The financial communities know that it is much safer for them to put money into an established business as compared to a start-up business.

The financial community that we mention above is familiar and comfortable in working with business people in leveraged transactions for solid established businesses.

 


They understand their business and what's more they are comfortable and understand the businesses of their clients. They know that asset-based transactions are a good investment for them and that historically they have worked well for many buyers who use their services (and capital) to buy businesses.

Keep in mind, as an example, if you buy a successful business for $1 million using other people's money; you own a significant asset that produces a regular income. It doesn't matter if you bought the business without using any of your own money. When the financing is paid off you will own a $1 million business asset free and clear.

 


Paid for by other people's money that is paid back from the cash flow of the business!

The business market favors the knowledgeable buyer!

 


From time to time I will continue to post additional details to this forum; but if anyone is interested to directly discuss the above, and how this method and information may help you, just click on my profile for information about me and my contact information.
  • Re: No Money? No Problem … Buy A Business With $0 Down
    HelpEconomy Newbie
    Currently Being Moderated
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  • Re: No Money? No Problem … Buy A Business With $0 Down
    ANGELPR Newbie
    Currently Being Moderated
    I AM INTEREST
    • Re: No Money? No Problem … Buy A Business With $0 Down
      greg53 Newbie
      Currently Being Moderated
      Hello. New here, desperately looking for some advice. I have interest in buying the current company I work for. It is a small music/advertising company in Chicago. I have been working there for about 1 year. I started as an intern for graduate school and ended up getting hired after only one month. Long story short, I've done a great job working my way into the fabric of the company, but my timing was off. My boss is trying to sell the company. He is having a mid-life crisis and wants to do other things. I know the business is still extremely promising. It has brand name, established clients, and an amazing location. It is heartbreaking for me to watch the company drift away. So much so that I have recently pondered buying the business. I know what it takes to run the business and to help it grow. Unfortunately I just finished graduate school a couple months ago and I have no money. I need advice. Do I talk to a bank? Some of the clients with a lot of money? Can this be done? Any help would be greatly appreciated. This feels like a once in a life time opportunity.
      • Re: No Money? No Problem … Buy A Business With $0 Down
        Expert
        Currently Being Moderated

        Hi,

        Welcome to the community.

         


        Being on the inside of the business can give you an edge but there are a lot of important things to cover when buying a business (and how to determine if its possible to buy it without using your own money). So it is not practical to put them all here in reply to your question. But I will list here the high points that you should look at first:

         

        1. Is the owner selling because he "wants" to do something else with is life or he "needs" to because he sees the business not doing as well in the future as it has in the past. The real reason for selling is very important to determine early on as best you can.
        2. What is the revenue and net income of the business for the past 3 to 5 years? Check their financials for the last 3 years and see how sales and profits are trending. Are they going up, flat or declining?
        3. What do they forecast for the next 3 to 5 years?
        4. How strong is the balance sheet ... i.e. are their assets with value and is the business carrying debt?
        5. Do they have appraisals to prove the value they are putting on the assets? Can any debt on the books be assumed?
        6. Will the owner carry back any financing?
        7. Have they established an asking price? Do you know what they are basing their asking price on? Is that a fair and acceptable price?
        8. Can the financials be realistically re-cast to roll more to the bottom line; to more clearly show investors or funding sources the businesses ability to pay them back?

         

        There are many more questions but the above will be critical when it comes to putting together a plan to line up deal structure to create cash and arrange a financing package to buy the business.

         


        Putting other due diligence questions aside for now, it is possible for funding to be created for many types of acquisitions, using the assets from the deal itself and by crafting suitable deal structure with the business owner.

         


        Most small business sellers want cash; but in reality, in order to sell they must be willing to take back financing. Rarely do small businesses sell for all cash ... and frankly a buyer would be making a mistake if they did pay all cash.

        There are better uses for their cash. The compelling reason to have the seller have some sort of "skin" remaining in the deal is "what does it tell you about their faith in the business if they won't carry back financing?"

        Conventional bank funding can be difficult to get unless you have a business record for them to rely on, great credit, provide personal guarantees and collateral. So you have to look at the acquisition from all angles to make maximize use of whats there to work with not only with your own resources but what the business can bring to the table itself. By doing that kind of work, evalution & analysis of the deal and by being prepared you greatly increase the odds of arranging funding to buy the business.

         


        That are many ways to create cash to buy a business or stretch any cash you have on hand so that you can buy more of a business. But it starts with finding out what you have to work with and then using it in the right way. You might want to consult a professional with experience to help you with that or do some studying to get more knowledge about how to buy businesses under your belt.

        Sometimes it is better to pass on a deal if it is the wrong one. I discuss that in detail in one of my books on buying businesses but simply put: "do not buy a business just because you can" ... make sure it is the right business for you to buy before you do the deal. So it is very important to make sure that you have established that price and terms of the deal are fair and that it is the right business for you and that it meets and passes all of your due diligence.

         


        I hope the above helps you or gives you some direction.

        Let me know how things progress; feel free to contact me directly if you'd like to discuss your deal (my contact info is in my profile) or if you have other specific questions and I'll help you with what feedback I can give you.

        Dennis Lowery
        Adducent, Inc.
  • Re: No Money? No Problem … Buy A Business With $0 Down
    Expert
    Currently Being Moderated
    Something I want to add to this post:

     

    The point that I want to make is that the cash for the down-payment does not have to be yours.

    1. Asset based and collateralized lending has been around for hundreds and thousands of years.
    2. Using the assets and cash flow of a business to help you buy it is something that's commonly accepted in the financial community.
    3. There is a whole industry of lenders and investors who focus just on that very thing.
    4. There are literally hundreds and thousands of investors and lenders that put money into businesses based on the assets of the business and its cash flow and ability to pay the money back.All of the above, are the reasons that leveraged transactions have worked in the past, they work today and will work in the future.
    5. Deals can be structured to safely, with adequate margin, buy and operate the business.
    6. This methodology and approach does not require you to create (or take on) a risky situation where you over-pay or over-leverage the business

    It can be done. It just takes study and application of knowledge specific to accomplishing the objective of buying a good business without using a lot or or any of your own money.
    • Re: No Money? No Problem … Buy A Business With $0 Down
      greg53 Newbie
      Currently Being Moderated
      Wow, thanks for all the advice and wisdom Dennis.  I know I have a lot to think about.  I think the main concern is future profits.  The business hasn't been nearly as profitable as it was in the past.  I think the problem is the owner, I mean how can you continue to bring in business when you are looking for a new career?  Also the company is in the music industry.  This industry has endured major changes over the course of the past 8-10 years.  The owner is stuck in the "old school" ways of dealing with the industry.  I think the technological changes that have impacted the business are inspiring him to quit rather than to adjust.  I however have been studying this industry day and night for the past 4 years.  I truly feel that I know how to shift the business to profit off of the modern music industry.  I feel like I have the people and the idea, now I need to figure out the financial details.  Again, thank you so much for your time.  I am very thankful I found this forum and will continue to bother you and others with questions ;)
      • Re: No Money? No Problem … Buy A Business With $0 Down
        Expert
        Currently Being Moderated

        You're welcome. The stability of future revenue and ability to generate acceptable profits is key ... especially when buying your first business. You don't want to discover after you buy the business that you have to become a "turnaround artist" your first time out as a business owner.

         


        Based on what you've said about the situation, by approaching the owner in the right way - you might have some leeway to structure something that would be mututally beneficial. Just be sure to dig deep into whether you can get the business back to stable (and growing) profits. As a thought, with your perspective and vision on how to move the business forward perhaps he needs someone to "partner" with him to relieve him from that responsibility (which could be a relief to him) so he can ultimately transtion out of the business. I have seen this happen before as a form of "mini management buy-out" ... where an insider takes over the business from the owner in a structured transition or exit-strategy for the owner.

        Food for thought for you anyway. If you have a conversation with the owner about your interests on this and want to bounce it off someone for ideas on how to pursue ... feel free to contact me.

        Dennis Lowery
        Adducent, Inc.
  • Re: No Money? No Problem … Buy A Business With $0 Down
    skelton116 Newbie
    Currently Being Moderated
    I have found several businesses that I am interested in, but all are out of reach as far as how much upfront money is needed. I would really like some help on buying a 'web-based' business and some information on who would be interested in financing a purchase like that. If you were interested personally that would be an ideal situation. This businesses turn profits in the 250k - 1M range and any money borroed could be paid back within 3 years and the profit to the lender thereafter. Please let me know if you think you can help me with this. I have always wanted to own my own business, but I will never have the cash to and established business. I am certain that I can run any of the selected businesses effectively and grow them to their highest potential. I am tired of the 9 - 5 drag and I want to work for ME now. Please contact me directly if you are interested or think that you can help me in any way, it would be appreciated greatly. ~ Jody Skelton, jody116@hotmail.com
  • Re: No Money? No Problem … Buy A Business With $0 Down
    Metovex Newbie
    Currently Being Moderated

    Brilliant! What would of taken me weeks or even months to find out about it took me minutes to understand the process.
    I am a 19 year old who is very driven to succeed and wants to waste no time at all in getting involved in the mix.
    The only problem is start up capital, and i feel i am a bit closer to the solution with this post.
    I would love to stay in touch with you for advice on investing opportunities.

     


    Regards,

     

    Marvin
  • Re: No Money? No Problem … Buy A Business With $0 Down
    ahyman6 Newbie
    Currently Being Moderated
    I am looking to get out of my current industry and purchase a bar. before my current job i was in the wine and liquor industry for about 7 years so i have a good idea of the hard work and time that goes into this type of business. Coming up with the money is the hardest part now, many people see bars as one of the most risky businesses. any thoughts on coming up with some startup money to buy this business?
    • Re: No Money? No Problem … Buy A Business With $0 Down
      Expert
      Currently Being Moderated

      There are several ways to minimize or even eliminate using using your own money to buy a business but each deal has to be evaluated to see what might be applicable to help accomplish that. Theres a lot of questions that would need answers before I could give you an idea if this deal has any possibilities or not.

      If you get a chance, check out the articles on buying a business at my website http://www.adducent.tv/. One specifically that is a good starting point can be found at:

      http://www.adducent.tv/articles-news/102-first-steps-to-buy-a-good-business

      Buying a business needs to start with determining if its the right business for you to try and buy. After you read the above article; post here some more info on the business or feel free to email me directly via my website and I can give you some specific feedback on it.

      Dennis Lowery
      Adducent, Inc.
  • Re: No Money? No Problem … Buy A Business With $0 Down
    Alex07631 Newbie
    Currently Being Moderated
    I actually just ran into this topic trolling around the internet and figured...what the hell, might as well give it a shot!

    I am currently an Executive Vice President at a company that is on the brink of collapse.

    I have given my soul to this company and have given money out of my own pocket trying to save it...not just me but others also. I am just talking about myself.

    Right now, I have 20 million shares worth practially nothing. And the business is borderline Chapter 7. I have never worked harder, sacrificed more, taken cuts in pay...you name it, I did it to try and keep this place afloat. Its literally the best job I ever had and that is why I did so much to try and save it the last two years.

    In April, I finally threw in the towel. I have no more to give. And I told my wife I would never go all out for a company unless its something I own. Which brings me to this topic.

    How can I buy a business with no money down? That sounds insane to me especially with the way things are in this country right now.

    I have had my eye on this business and its up for sale for about 550k. No way I can afford this since I have given so much of my savings to my present company. I currently just have about 12k saved.

    But this business is a gold mine. It generates great revenues. Its pretty automated. I just have to do some marketing and keep an eye on the employees. Thats it. The fundamentals of that business are quite strong, I must say.

    How can I go about doing this, Adducent. Is it really possible? I have IMPECCABLE references that I can submit to anyone that can vouch for my character, integrity, work ethic...whatever. They are all from C-Level people in the US and in Switzerland. But that and a bag of beans will get you squat at a bank when they run your credit and see that in the last 18 months, you basically ruined your credit...even though its because of my paycuts that I just had to make necessary adjustments so that I can hold out hope things would turn around at the firm.

    I would quit tomorrow if I knew I can run something of my own. That business can be my ticket back and I am pretty sure it can be the stepping stone to other bigger and better things. First things first.

    I don't think I can ever sell my soul to corporate America again. It has to be about me going forward.

    Any feedback on this would be greatly appreciated.
  • Re: No Money? No Problem … Buy A Business With $0 Down
    8acompany Newbie
    Currently Being Moderated
    here are my 2 cents in thoughts....

    I am such a virtual person I do not recommend in investing in bricks n mortar businesses.

    If you want to sell a product... find a supplier and be a re-seller, but don't stock the inventory, just sell the inventory as a drop shipper.

    Become an affiliate marketer - go to clickbank.com and find thousands of online products to sell for others
    check out affiliateclassroom.com for a great monthly newsletter with great ideas

    and finally add Google AdSense to your website and get paid for people clicking on links.

    Good luck!
  • Re: No Money? No Problem … Buy A Business With $0 Down
    Aleena4343 Newbie
    Currently Being Moderated
    i was searching online and i reached a place and :oh! yes: the time has come that you can earn even 400-3000$ without having any website and the amazing thing is that this system is free to join http://www.clicknearn.net/2633-53.html and the condition is this that you can join more than one money making program and there you can also find the full job list to increase your income with in seconds.
  • Re: No Money? No Problem … Buy A Business With $0 Down
    nyroxygrl Newbie
    Currently Being Moderated
    Is this true? If so, I would love more information because I want to buy an existing laundromat and begin my career from there. I have looked at a few laundromats in my county and found all the information I need to begin, including start up capital, and expenses. I have a semi-finished business plan and would appreciate any information on this buy a business with $0 down. I don't have much to start it up myself. Thank you.
  • Re: No Money? No Problem … Buy A Business With $0 Down
    marauth02 Newbie
    Currently Being Moderated
    Great info,thanks for giving me and my wife hope of finally owning our own business. Is there any step by step program to buying a business with no downpayment that you can share with me. Thanks in advance
  • Re: No Money? No Problem … Buy A Business With $0 Down
    greggypetty Newbie
    Currently Being Moderated
    Thanks for thie info. When I started my business, I used the bootstrap method. (http://www.bootstrapbusiness.org/)
    It was tough, but it has turned out pretty successful, and I knew that I wasn't going to get into debt, and that I had already set how much I was willing to lose.
  • Re: No Money? No Problem … Buy A Business With $0 Down
    Snoopes Newbie
    Currently Being Moderated
    Hi Dennis,

    Very interesting and have enjoyed reading this blog.

    I have recently found a software company where the owner wants to retire. It averages between 3 to 4 million in annual sales and has a good recurring customer base. The software is such that it may be applied to 3 different industries with little modification and has great potential. This software address a niche where the big guys (i.e. Oracle, SAP, IBM and others) has missed.

     

    Over that last 10 years company sales have increased, but profits have declined. The owned has tried to get a straight buyout, but investment companies have declined due to low profitability but have stated if profits track upward within 18 months would be interested. I have talked with the owner and he would be interested in purchase with a guarantee annual payment with some monies down.

     

    I may have located investors for the down payment, but have concerns how to structure the deal such that my displacement (which often happens) by the investors before I have had a chance to re-pay them back.

     

    Would appreciate any input on how to structure this deal and any advice or caution that I should be aware of.

    Thanks Jeff
  • Re: No Money? No Problem … Buy A Business With $0 Down
    malarcon Newbie
    Currently Being Moderated
    I was reading this blog and I'm interested on obtaining information about buying an existing business.
    The business I work for is currently for sale. The owner retired and got and the son took over; however he already has other business going on and doesn't want to deal with the company his mom left, which is the reason why he is selling it. I am really interested in buying this business. I am the accountant and see a profitable business in this opportunity. My question now is, how do I obtain money to do this? What is the best way to go about purchasing this business?
  • Re: No Money? No Problem … Buy A Business With $0 Down
    kivschil Newbie
    Currently Being Moderated

    Hello,
    My colleague and I work for a theatrical curtains rental company which is doing really great, has shown growth at least the last 5 years and has so much potential to keep growing. The owner is in his mid 60's, nearing retirement. We have noticed a definite decrease in his attention to the business and are concerned that he might soon be considering selling the business. We would like to approach him about taking over the company but are unsure how to start the whole process. We are considering both an out right purchase of the business or a partial purchase with a percent of the business. I have read in some of the previous posts how showing lenders that the original owner staying on as basically a shareholder increases your ability to acquiring funding. Any advise or tips would be greatly appreciated. We want to have a solid plan together before we approach him but we fear waiting too long that he might seek out other avenues without approaching us first.

    Many Thanks
    kivschil

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