Buying a Business For Dummies

Chapter 7

Financing Your Deal

IN THIS CHAPTER

Seeking financing from banks and nonbanks

Borrowing from sellers

Paying by yourself (and maybe some help from your friends and other sources)

When you buy a business, you can finance the deal yourself from your personal savings and investments or you can use outside capital from a bank or nonbank source. Some sources of capital loan you money (banks, Small Business Administration, and others); others invest their money for an equity stake in your business (family and friends, some angel investors, and the like). Many business buyers even borrow money from the sellers. All these options are described in the sections that follow.

Outsourcing Financing

Generally speaking, you’ll have far more opportunity for outside financing when you’re buying an established business versus when you’re launching a start-up. This is because most capital providers are looking for either significant collateral and operating history (as is the case with banks and the SBA) or a business in an industry with good opportunities for return on investment (as is the case with equity investors). Angel investors are the most versatile of the outsourcing resources, ...