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How to buy an existing business with limited funds

Brad OConnor

April 14, 2021

Buying a business does not have to break the (Piggy) Bank 


Buying an existing business is a great way to make a debut in the world of business, or to expand your portfolio. Purchasing a company that is already operational has many benefits, including a loyal customer base, a well-established product or service, and staff that already know the business.

Having limited funds does not necessarily limit your business buying abilities; here are a few tips for business buying on a budget!

Timing, timing, timing!

Timing just might be the most crucial part of this transaction. In this case, we are not talking about your own personal timing, but rather the timing of the business owner in question. When you do your research, you want to look for business owners who are ready to exit their business. They may be ready to retire, or just looking to move on to new opportunities. If you can be in contact with the right person at the right time, it could lead to you getting a good deal. Retiring business owners likely present the better opportunity here, as they have more incentive to sell quickly and thus may be willing to give you a break on the price.

Find a business that’s offered with seller financing


First of all, what exactly is seller financing? Seller financing is a special type of loan where the individual selling the business lends money to the buyer to facilitate the sale process. In a similar way to a bank loan, the terms of the agreement, including interest rate and timescale need to be officially documented in a legally binding contract. If you find a business that you would like to purchase that is offering seller financing, you would make a down payment, followed by monthly payments at the previously agreed upon rate. If you are able to find a seller who is willing to lend you the money to buy their business, this means that they believe in their business, and they also believe that you will manage it well.



Find a passive investor.


If you are not able to afford to purchase the business yourself, finding an investor who does not wish to be involved in the day-to-day operations is another option to explore. If you can find a business whose owner wishes to retire, and an interested passive investor, this would be an avenue to consider. Securing a passive investor would allow you to buy and operate the company, while you pay a percentage of its income to your investor. This is similar to seller financing, but in this case, you aren’t in debt, and payments are based on the continued success of the company.


Be creative!


Buying a business with limited funds means that you need to be flexible, resourceful and creative! It might also mean that you need to work harder to make sure the transaction is a successful one. Perhaps you would like to offer sweat equity in exchange for lower loan payments, or come up with alternative financing solutions to make it work. Entrepreneurship is all about being resourceful, and when money is tight, creative strategies become extra important.


Just because your funds are limited, does not mean that your business buying options are. All it takes is timing, creativity and a little bit of perseverance. Ready to get started? I can help. Contact me today!


More questions?  We can help.

EVALUATION/CONSULTATION


If you are a business owner considering selling a business, and would like to learn more about OConnor Business Brokers and Consultants and the services we offer, please contact us to arrange a confidential business evaluation. 

You will meet one of the Directors of OConnor Business Brokers, and your requirements will be discussed. During the meeting you will have the opportunity to find out more about selling a business, and how our business brokers and M&A Advisors can assist you with the business sale process. 

Unlike many other approaches, OConnor Business Brokers start without any preconceived ideas about what is right for you and for your business. By understanding the business and your motivation we can help steer you in the right direction. This often challenges conventional thinking and comes as a refreshing change to the norm.


The Directors of OConnor Business Brokers have experience as business brokers, business consultants, M&A advisors, and business owners. We understand the challenges and pressures that face a business at any one point. We therefore use our time together not to try and sell you our services but to help you understand your options and how we can help.


An initial meeting lasts approximately one hour, and can take place virtually or in person at our office.



Evaluation and Consultation Request

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