How to Finance the Purchase of a Business: Your Options
How Do You Finance a Business Acquisition?
There are several ways to finance a business acquisition, each with its own set of advantages and disadvantages. Here are a few options:
Savings
Using personal savings is the most straightforward way to finance a business acquisition. However, it’s also the riskiest as it involves putting your own money on the line. It’s important to ensure you have a safety net and aren’t depleting your savings entirely.
Loans
Business acquisition loans are a common method of financing. These loans can be obtained from banks or other financial institutions. They typically require a solid business plan and good credit history. It’s crucial to understand the terms of the loan, including the interest rate and repayment schedule.
Investors
Finding investors is another way to finance a business acquisition. This could be through venture capitalists, angel investors, or even friends and family. Investors provide funds in exchange for equity in the business. This means you’ll be sharing your profits and decision-making authority with them.
Seller Financing
In some cases, the seller of the business may be willing to finance part of the purchase price. This usually involves making regular payments to the seller over a specified period. Seller financing can be beneficial as the seller may offer more favorable terms than a bank.
Crowdfunding
Crowdfunding platforms allow entrepreneurs to raise funds from a large number of people, usually in exchange for a product or equity. This can be a great way to finance a business acquisition, especially for businesses with a strong community following or unique product offerings.
Can You Get a Loan to Buy a Percentage of a Business?
Yes, it is possible to get a loan to buy a percentage of a business. This is often referred to as a partial acquisition. Banks and other financial institutions may provide loans for this purpose, but the requirements can be stringent. You’ll likely need a strong credit history, a solid business plan, and potentially some form of collateral.
It’s also worth noting that the current owners of the business will need to be on board with this arrangement. They’ll likely want to see your business plan and understand your intentions for the business before agreeing to sell a portion of it.
How to Afford to Buy a Business?
Affording to buy a business often comes down to careful planning and exploring all available financing options. Here are some strategies to consider:
Budgeting and Saving
Start by determining how much you can afford to put towards the purchase from your own savings. This will give you a starting point for your budget.
Exploring Financing Options
As mentioned earlier, there are several ways to finance a business acquisition. Research each option thoroughly to understand which is the best fit for your situation.
Negotiating the Price
Don’t be afraid to negotiate the price of the business. If you can bring the price down, it may become more affordable for you.
Partnering Up
Consider finding a business partner. They can bring additional funds and resources to the table, making the purchase more affordable.
Leasing with an Option to Buy
In some cases, you might be able to lease the business with an option to buy it later. This allows you to spread the cost over a longer period.
Remember, buying a business is a significant investment. It’s important to take your time, do your due diligence, and consult with financial advisors or business brokers, like the experts at Hello Exit, to ensure you’re making a sound decision.
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Testimonials
What our clients say
In my career you get to deal with a lot of service providers. There are the below average, the average the the above average. Then there is one category that no one talks about which is the exception. We engaged Hello Exit to source acquisition targets for us. The communication, personal service, attention to details, availability, interaction with the team has been nothing short of exceptional. If ANYONE wants further in-depth conversation about the exceptional experience please reach out.
I worked with Hello Exit for the sale of a business and everything went smoothly. The team was very hands-on and provided a lot of guidance throughout every part of the process. They took the time to get to know my business well and were able to communicate our operation effectively to potential buyers. The sale was a success and I couldn’t have done it without them.
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It was a pleasure working with Hello Exit and they have my most sincere recommendation. They bring a sophistication and etiquette that is very hard to find in the lower, lower middle market – outstanding preparation, excellent sell-side coaching, a rationale / unbiased disposition, and so on. In addition, they bring a powerful network to the conversation and can add value well beyond the transaction. I hope to work with Hello Exit on many more deals to come!
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Hello Exit has built one of the best online business brokerages out there. As a buyer, the company has continuously provided us with acquisition targets that have been very well qualified. Every opportunity has fit directly into the criteria we’ve been looking for which has saved a ton of time on due diligence. If you want to get a jump start on your acquisition pipeline, it’s easy to recommend Hello Exit.
Hello Exit is one of the most knowledgeable business brokerages out there for tech & web businesses. We used they to buy a significant business operated by 15+ employees. Our work in diligence was substantially reduced given the strong & accurate information package he provided. All questions were proactively answered, all supporting data was there and presented in the right format, and everything was accurately represented. This saved us weeks of work! In discussions & negotiations, they played a fair role & helped resolve issues by understanding the issue from the perspective of both buyer & seller. With their knowledge and experience, they were able to make smart suggestions and helped everyone reach a common ground quickly. I would surely work with Hello Exit again. They are super!
What can I say other than Hello Exit delivered on everything they promised… and then some. At first, I didn’t believe it when they said he would sell my agency in a few months. But they were so passionate about working together, a part of me believed they would deliver. And they did. We had 3 offers in 30 days and went under contract with the highest offer. 3 months later we closed on the sale at the price they evaluated us on. During the entire process, their knowledge and experience helped immensely. Any time there was confusion or a hurdle that myself or the buyer had, the team stepped in and smoothed every over. Selling a business is one of the most invigorating yet stressful experience I’ve ever went through and I’m so grateful that I picked the right broker to help me through it. I’d use Hello Exit again in a heartbeat.
The Hello Exit team was great to work with. They helped increase our deal flow with strategic deals. If someone is looking to increase their targeted deal flow I would definitely recommend working with Hello Exit.
Hello Exit was awesome to work with on the deal. They provided great support and advice all through – from initial interest discussions, negotiations, contract closure to execution. They’re very prompt and proactive which sails the deal making through. They also provided great support and mediation help post transition on some key contract payout clauses, which is highly appreciated. I recommend Hello Exit highly to SaaS business owners and entrepreneurs.
I’ve known Dustin (Hello Exit’s Founder) for over 10 years, and actually acquired a SaaS company he founded. I’ve always found Dustin to be extremely sharp, fair and honest, reasonable to deal with, and the kind of person you would want to do business with again in the future (which is rare these days). I’m currently mentoring and incubating over 150 international startup companies, and have already talked with Dustin about bringing Hello Exit into these businesses to broker the exit once they are profitable and solidly into their momentum phase.
Hello Exit is one of the best and most trustworthy SaaS advisories and brokerages in the industry! If you run a SaaS business, and Hello Exit contacts you, you should definitely talk to them! Even if you decide not to sell, it will be a very worthwhile and fruitful conversation.
