How to Buy a Business With No Money in 2024

TL;DR

You can buy a business with little personal money by using seller financing, an SBA loan, or outside capital instead of paying entirely in cash. The speaker outlines four purchase methods and favors seller financing because payments can come from the acquired business’s future profits. Established “boring businesses” may also provide income immediately, making the financing options and real acquisition examples worth exploring.

Transcript

I'm going to tell you guys the hands down smartest way I've ever seen to get to five figures in monthly income and it is the best way to hit your first ten thousand dollars a month especially in 2023 according to me it has the lowest failure rate it allows for income on day one and it's how people like Warren Buffett made his millions I know it's n... Read More

Key Insights

• Buying small businesses using other people's money is a viable path to significant income, even for beginners.
• There is a surplus of businesses for sale, especially due to retiring baby boomers, creating opportunities for buyers.
• Seller financing is a common method, allowing buyers to pay through future profits, minimizing upfront cash requirements.
• The government offers SBA loans, covering up to 90% of a business purchase, though the process can be lengthy.
• Cash purchases are the least favorable due to high personal financial risk and reduced capital flexibility.
• Negotiating seller financing involves convincing sellers to accept annuities over lump sums, benefiting both parties.
• The Lindy effect suggests businesses with long histories are more likely to continue thriving, reducing investment risk.
• Many small businesses fail to sell, often due to personal circumstances of owners, presenting unique buying opportunities.

Questions & Answers

Q: How can you buy a business with no money?

The speaker recommends financing the purchase with other people’s money, especially through seller financing. Under that arrangement, the seller accepts payments over time, allowing the acquired business’s future profits to help fund the purchase.

Q: What are the four ways to finance a business purchase?

The four methods are cash, a bank or SBA loan, seller financing, and outside capital. Outside capital can come from friends or wealthy investors, while seller financing comes directly from the business owner.

Q: Why does the speaker favor seller financing?

Seller financing can reduce or eliminate the buyer’s upfront payment because the purchase price is paid over time. Its terms can also be more flexible than structured bank debt, while giving the seller recurring payments instead of a lump sum.

Q: How can an SBA loan help finance a business acquisition?

According to the speaker, an SBA loan can cover up to 90 percent of a business’s purchase price. The drawbacks are debt, interest, less flexibility, personal exposure if the business fails, and a process that may take long enough to jeopardize the deal.

Q: Why is paying cash the speaker’s least favorite option?

A cash purchase puts the buyer’s own money and risk into the deal. Although it may produce a better price and close quickly, the money is then unavailable for other uses.

Q: Why might buying an established business be less risky than starting one?

The speaker invokes the Lindy effect: something that has existed longer is more likely to continue existing. On that reasoning, a small business operating for 10 years may present less risk than an unproven startup.

Q: What zero-down business acquisitions does the speaker describe?

The speaker says approachment.com was acquired for zero dollars down at a price of 60k paid over multiple years. The speaker also describes buying a laundromat for a hundred thousand dollars with zero down that cash flows sixty seven thousand dollars a year.

Q: What prevents people from buying small businesses?

The speaker identifies lack of awareness, difficulty finding businesses, uncertainty about the acquisition process, and money as the main barriers. The financing methods are presented as ways to overcome the belief that buyers need substantial personal capital.

Summary & Key Takeaways

• The video discusses a strategy for acquiring small businesses using minimal personal funds by leveraging seller financing and other people's money. It highlights the potential for significant income and the low failure rate of this approach compared to starting a new business.

• With many baby boomers retiring, there is an abundance of businesses for sale but not enough buyers. This creates an opportunity for individuals to replace their W2 income by purchasing established businesses, often with favorable financing terms.

• The content explains four methods of financing a business purchase: cash, SBA loans, outside capital, and seller financing. Seller financing is emphasized as the most advantageous due to its flexibility and reduced upfront cash requirements.