How to buy a business with no money – is it possible to buy a business without any money?
This article is about whether it is possible to buy an existing business without money and if so, how.
I have written a very reasonably priced book about ‘No Money Down‘, which is aimed mainly at investors looking to buy property, however, the methods explained in the book can be easily directed at buying a business, as it lists methods of raising capital which could be used for this purpose.
How to buy a business with no money? It is important you ask this question, rather than say “I can’t buy a business because I don’t have any money!”
One of the best ways of financing a deal for a buying a business is to use ‘Vendor Finance‘. If you’re not familiar with what vendor finance is, then let me explain…
Vendor finance is where the owner of the business either part finances or will completely finance the sale of the business by effectively putting up the money. In other words, this means that they are taking delayed payment of the final agreed selling price.
Now you might ask – do these deals exists? The short answer is yes they do, however, it does take time and a bit of work to find the business and you need to be prepared to ask the question to the owner. Some owners will immediately understand the question, whereas I have come across owners that have been either insulted at the question or don’t understand. It is true that this concept is more familiar in America, as in my looking to buy a business, I came across an American who ran a business sale agency and he had listed a company with Vendor Finance as the preferred option to sell – the only one I ever came across where I didn’t need to ask this question.
So the way I see it is you’ll need to kiss a lot of frogs! With the frogs being businesses to buy, but there are these deals out there, you just need to find them. It will mean though, that you might not need to be too fussy about the type of company you buy, simply because, you might find the company you are looking to buy which ticks all other boxes, but for the fact the owner will not take a delayed payment.
Buying an existing business is a bit of a lengthy process in any event, so when you add a different dimension to the buying process, then you will need to review a whole lot more.
There are other considerations – when the solicitors get involved, they usually don’t like vendor finance and will try to persuade the seller away from the idea. Also, they will sometimes ask for security and personal guarantees, which I used to refuse or would happily put the business up for security.
The other consideration is that you might end up having to pay more for the company – most people would prefer money ‘Now’, as it were, so if you introduce the concept of waiting for money, by its very nature there needs to be some form of compensation for this delayed element. You might even want to offer a higher amount, to encourage a might be skeptical business seller to sell using this method.
Buying an existing business with no money and bad credit might be a problem, however, this might not need to be a complete no go. It will be difficult, but if you are able to get together some money from people who trust you and then find the right business, with a business owner prepared to take timed-payments, it might be possible to purchase your first business. It’s unlikely, that the vendor of a business is going to perform credit searches on you personally if you have bad credit, whereas a bank or other lending institution will. So the reality is, if your credit is poor, a bank loan is likely out of the question, especially if you have County Court Judgments or (CCJ’s) against you.
The reality is you will likely need to borrow money to buy a business. But if you’ve done your homework and you’ve done your planning, this should not pose a problem for you.
Now here is one more thought, which is a real positive for a no money down deal and vendor finance – if the seller of the business is happy to ‘self finance’ the sale, then in my opinion this shows he is ‘putting his money where his mouth is‘ and is confident about the business. I’ll let you think about how you stand on that one. Anyway good luck and if you would like any input or advice, we have a support forum where you can pose your questions – this is one I’d be happy to field.
How to buy a business with no money…where do I look for the right business to buy? If you are stuck for where to look for a business to begin the process of seeking out that ‘no money down deal‘, I suggest http://uk.businessesforsale.com/ – there are plenty of businesses here, and this is where I found my last deal, which did include just under 30% vendor finance within the deal.