Buying a business might sound like something only cash-rich entrepreneurs can do, but that’s far from the truth. With the right financing strategy, you can make a smart acquisition without draining your personal savings. Here’s how buyers are making it happen.
SBA Loans: A Popular Option for Small Business Buyers
The Small Business Administration (SBA) offers loan programs that facilitate business acquisitions with favorable terms. The SBA 7(a) loan, for instance, is commonly used for purchasing existing businesses. These loans typically feature lower down payments, extended repayment periods and competitive interest rates. However, applicants must meet specific eligibility criteria and provide comprehensive documentation.
SBA loans are especially useful for buyers with strong credit and a clear business plan who are looking to purchase an established operation. For a detailed overview of the SBA loan application process, refer to our blog post on How An SBA Loan Is Applied For and Obtained.​
Rollover for Business Startups (ROBS)
ROBS allows you to use funds from your retirement accounts, such as a 401(k) or IRA, to finance a business purchase without incurring early withdrawal penalties or taxes. This strategy involves rolling over your retirement funds into a new retirement plan that invests directly in your new business.
Because ROBS relies on retirement savings and requires specific steps like forming a C Corporation and maintaining a compliant retirement plan, it’s important to set it up correctly. Many buyers choose to work with experienced providers who specialize in this process to ensure everything is handled properly. When done right, ROBS can be a powerful way to invest in yourself while keeping your cash reserves intact. You can learn more about financing options and connect with specialists like Guidant and Safe Harbor in our Finance Center.
Seller Financing: Negotiating Terms with the Owner
In seller financing arrangements, the seller agrees to finance part of the purchase price, allowing the buyer to make payments over time. This method can be advantageous if you lack sufficient upfront capital or face challenges securing traditional financing. Seller financing terms are negotiable and can be tailored to suit both parties’ needs.
For more insights on structuring such deals, see our article Creative Financing for Buyers.​
Other Financing Options
Home Equity Loans or Lines of Credit
If you have significant equity in your home, you might consider leveraging it to secure a loan. This can be a useful option if you’re buying a lower-cost business or need to supplement other financing. However, this approach carries the risk of losing your home if the business venture doesn’t succeed.
Angel Investors or Venture Capital
Bringing in outside investors can provide the capital you need to acquire a business, but it often means giving up equity and some decision-making control. This route is more common for businesses with significant growth potential or a scalable model.
Crowdfunding
Platforms that allow you to raise small amounts of money from a large number of people can be effective, especially if your business idea has mass appeal. Sites like Kickstarter, GoFundMe and Fundable give you a way to pitch your vision, gain support and raise capital without taking on debt or giving up equity depending on the model you choose. Crowdfunding is typically best suited to businesses with a strong community focus or a compelling story to tell.
Next Steps in Financing Your Business Purchase
Do you need help evaluating a business for sale? It can be complicated, and a local Business Broker can assist you. Use our directory to find a Business Broker near you, or contact us for personalized assistance.​
By exploring these financing methods and seeking expert advice, you can acquire a business without depleting your personal savings, setting the foundation for a successful entrepreneurial journey.
Ready to see what’s out there? Browse businesses for sale in your area and take the first step toward owning your future.
