How You Buy a Business Where The Business Pays For Itself

How You Buy a Business Where It Pays For Itself

By Russell Bowyer

You can buy a business with no money of your own, by using the business you want to buy, to pay for itself.

To buy a business that pays for its own acquisition, you use the cash or assets it owns to fund the deposit, and you use its future cash flows to pay the balance over a period the business can afford. Buying a business in this way means you don’t need to use your own funds to buy a business.

You achieve this by using the cash the business has in its bank account, for the deposit, but In doing so, you must only use the excess cash that’s not needed by the business for its day to day requirements.

If the business doesn’t have excess cash, or if the excess cash it has isn’t enough to cover the required deposit, you can use the assets the business owns as well or instead, as collateral for the business to borrow the money, to pay all or the rest of the deposit.

Assets you can use for this purpose include property, plant and equipment, vehicles and the amounts owed to the business by its corporate customers (this last one is known as invoice financing or factoring).

Then you use the business’s cash flow to pay the balance of the purchase price, which has to be paid over a timeframe the business can afford to pay it, otherwise the deal cannot work.

Which means for you to buy a business with no money, you can only do it with profitable cash flowing businesses, otherwise it just won’t work.

The outcome; you will have just bought yourself a business using no money of your own!

The massive advantage to you of this method of buying a business, is that it applies to any size of business. In fact it works better the bigger the business, as bigger businesses have the cash, assets and cash flow to make the deal work.

This may sound too good to be true, but it works, and when you consider there are more businesses for sale than people like you looking to buy them, the odds are stacked in your favour for you to find deals of this kind.

Sellers with realistic expectations are keen to agree a deal like the one I’ve just outlined, especially if they are motivated to sell.

The reason a deal of this nature works for sellers, especially if they are motivated to sell, is because deals like this are quick to complete, especially for transactions that don’t include borrowing against the business’s assets.

But you maybe thinking that this is a one-sided deal in your favour only, but be assured, the seller benefits too.

For one, they sell their business quickly, rather than it languishing on the market for months or even years, which is a massive benefit to them.

But also, business owners can benefit from good tax breaks, because they’ve received the business’s excess cash as part of the sale proceeds, rather than as a pre-sale dividend payment.

So, now armed with this knowledge, all you need to do now is to understand the process involved in buying a business, which begins with where to find these businesses owned by motivated sellers.

If you have any questions on this topic about buying a business, or on any other aspect about the process involved in buying a business, please drop a comment below.

And always remember that no question is a stupid question, if you don’t know it, you don’t know it, and by having the answer to a question you have, might be all it takes to move to the very next step in your journey to buy a business.