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How to Buy an Existing Business with No Money

Date modified: December 27, 2023
Don't put your entrepreneurial dreams on hold because you don't have enough money to buy a business. There are several alternative funding methods that can help you find financing to start a business.
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Are you dreaming of buying a business, but your wallet says otherwise? Fear not. “Lack of money is no obstacle. Lack of an idea is an obstacle,” as Ken Hakuta, an inventor and entrepreneur, once said.

In this blog, we discover how to buy a business with no money,  sharing financing options to transform obstacles into stepping stones to business ownership. 

6 Benefits of Buying an Existing Business

Embarking on the path to acquire a company comes with several compelling benefits. 

Business professionals discussing finances.

Here are some of the main advantages:

  • High Success Rate: Statistics indicate that purchasing an existing business can be a safer bet in terms of longevity. Entrepreneurs who buy an existing business have a 90% to 95% chance of still being in business after five years, compared to a 10% to 35% success rate for new startups within the same time frame.
  • Reduced Risk: Acquiring an existing business is generally considered less risky than starting a new one from scratch. It often includes existing assets, such as real estate, employees, and equipment, which can be part of the transaction, potentially reducing initial outlay costs.
  • Ready-Made Staff: An existing business comes with employees who have already developed a sense of loyalty and possess knowledge about business operations that can be invaluable to the new owner.
  • Established Customer Base: Existing clientele not only contributes to immediate revenue but also can offer insights to help improve the business further by utilizing upselling opportunities and having to spend less on marketing costs.
  • Existing Infrastructure: Most business acquisitions include the necessary furnishings and equipment, which means no additional major expenses are often needed to get the company up and running.
  • Entrepreneurial Freedom: Even though the business is established, as a new owner, you have the freedom to implement your ideas and make your mark on the business.

Business Acquisition Strategies to Consider  

Seize opportunity without capital: learn how to buy a business with no money through the strategic acquisition tactics below.

Decide What Business You’d Like to Buy

Choose an industry you’re interested in and have experience in. Understanding the industry, products, services, and customers can help you build a more innovative and viable business. This not only offers you a head start but also equips you with a clear operational framework.

Alternatively, you can explore the world of franchising. It’s a route where the support is robust, and the business blueprint is tried and tested. You can access extensive resources and a proven business model from the franchisor. However, note that this comes with a trade-off – you’ll agree to share a portion of your ongoing profits with the owner.

In either case, arm yourself with a thorough understanding of the business’s value proposition and customer engagement strategies. This knowledge will help you make informed decisions that balance potential rewards with the commitment required.

Consider an Underperforming Business

If your capital doesn’t stretch to a turnkey operation, a business that’s currently not profitable might be within your reach. Such ventures can often be acquired at a lower cost, and with your fresh perspective and management skills, there’s a potential to steer it toward profitability.

Businessman getting loan from bank


When evaluating these opportunities, look for businesses with solid foundations, like a loyal customer base, that have room for operational or strategic improvements. Assess the company’s financials, market position, and operational challenges to see where you can add value. Remember, reviving a struggling business requires a clear vision, a sound turnaround strategy, and a commitment to transformation.

A great example of a successful acquisition is Groupe PSA, the company behind Peugeot, which acquired the struggling Opel from General Motors. By reducing model variety and focusing on cost efficiency, Groupe PSA restored Opel to profitability and saw its market cap surge by over 700%.

Evaluate the Price of the Business

There’s always a chance that you can afford the business after all. You can use an independent business valuation professional to find out. They look at the company’s financial history, including revenue, profit margins, and debt levels, to estimate a price. Market conditions, the business’s competitive standing, and assets like real estate, equipment, and intellectual property also play a role in determining the price.

Consult with a Lawyer

Before you finalize any deal, consult with a lawyer specializing in business acquisitions. They will ensure due diligence is thoroughly conducted, help negotiate terms that protect your interests, and identify any potential legal pitfalls that could jeopardize your investment.

A lawyer can also assist in structuring the deal in a way that may minimize your upfront costs, such as through earn-outs or seller financing, making the purchase more attainable with substantial capital.

Consult with a Lawyer

Before you finalize any deal, consult with a lawyer specializing in business acquisitions. They will ensure due diligence is thoroughly conducted, help negotiate terms that protect your interests, and identify any potential legal pitfalls that could jeopardize your investment.

A lawyer can also assist in structuring the deal in a way that may minimize your upfront costs, such as through earn-outs or seller financing, making the purchase more attainable with substantial capital.

Consider Business Acquisition Loans

Business acquisition loans can be a powerful tool when you don’t have enough money but want to buy a business. They offer the financial leverage needed to purchase an existing business, allowing you to take ownership and start generating profits that can be used to repay the loan. 

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Here are some of the common types of financing to consider:

Business Line of Credit

business line of credit works similarly to a credit card, allowing business owners to borrow up to a certain limit and only pay interest on the amount used. This is a flexible option that typically offers interest rates starting from 5.5%, with terms ranging from 10 to 25 years.

You can usually borrow between $5,000 and $5 million, and the time to funds is approximately 30 days. This can be particularly beneficial for managing cash flow, covering short-term expenses, or addressing unexpected costs without committing to a long-term loan.

SBA Loans

Small Business Administration (SBA) loans are popular due to their relatively low interest rates and long payment terms. These loans are partially backed by the federal government and offer amounts up to $5 million with interest rates between 10.5% and 13%.

Loan terms range from seven to 25 years and offer the benefit of predictable payments with fixed interest rates and long repayment periods. These features make SBA loans particularly attractive for small business owners who might find the terms of traditional loans too burdensome. Keep in mind that most SBA loans require you to make at least a 10% equity injection – meaning your funds.

Term Loans

Term loans are a traditional loan option where the borrower receives a lump sum upfront and repays it over a set period, often with a fixed interest rate. The rates for term loans can vary, but usually, they start at 6% with term lengths between six months and 10 years.

You can borrow between $25,000 to $500,000. As term loans typically offer a lump sum upfront, they can be ideal for business owners who want to purchase a business and have a clear timeline for when they will be debt-free. 

Consider Other Financing Options 

When traditional business acquisition loans aren’t the right fit, other financing avenues can bridge the gap to business ownership. Here are a few other sources for buying  a business with no money:

Leveraged Buyout (LBO)

A leveraged buyout (LBO) allows you to acquire a company using borrowed funds, or leverage, to cover the purchase cost. You'll need to contribute some personal equity, usually about 10% of the deal's value. This strategy enables you to purchase a larger business with a smaller initial investment. 

For example, in a $1 million deal, you might only need $100,000 of your own money. The remaining $900,000 is financed through debt, often with interest rates varying between 6% to 10%, depending on market conditions and creditworthiness. The assets of the company you're buying usually secure the loan, and its future earnings are used to repay the debt over a period, commonly ranging from five to seven years. 

By controlling a larger business with minimal upfront capital, your return on investment can be significantly amplified. Additionally, many LBOs can be structured with SBA-backed loans, which offer competitive terms and rates while still typically requiring just a 10% personal investment.

Seller Financing

Seller financing offers a quick alternative when traditional loans are inaccessible. Here, the seller acts as the lender, allowing the buyer to pay for the business over time. Typically, the buyer makes a down payment and then repays the remaining balance, along with interest, over an agreed-upon period. 

Business partners shaking hands in group meeting

The interest and term are usually determined by a negotiation between the seller and the buyer. This method offers the flexibility of direct negotiations, bypassing the extensive paperwork involved with traditional financing options.

Rollovers for Business Startups

ROBS 401k is an Internal Revenue Service-sanctioned process for using your retirement savings to invest in a business or franchise. They allow you to make a business acquisition without any taxes or penalties.

To qualify for this option, your business must be structured as a C-corporation, and it’s recommended to have at least $50,000 in retirement savings. While there are no credit score requirements or interest charges, there is a risk of losing retirement funds if the venture fails. 

There are no standard loan amounts, terms, or rates applicable to ROBS since it’s based on your retirement savings, not a borrowing arrangement. However, setting up a ROBS often involves setup fees and ongoing maintenance costs, which can vary depending on the provider.

Bank Loan

Bank loans for business acquisitions come with the primary benefit of stability, offering fixed interest rates and large sums to borrow. The average APR for traditional bank loans ranges between 2% and 13%. They provide a clear, long-term financial commitment, which can be great for buyers with strong credit and a solid business plan.

Businesses that have a good credit standing can typically score competitive rates. However, if you or the business don’t have a good credit history, the bank may not give you a loan. Moreover, the approval process usually takes longer than alternative financing options and requires a lot of paperwork.

FAQ on Buying an Existing Business

Here is our FAQ section if you still have some unanswered questions:

Can You Buy a Business with No Collateral?

Yes, it is possible to buy a business with no collateral, but it can be challenging. Traditional lenders, such as banks, often require collateral to secure a business loan. Collateral provides a form of security for the lender in case the borrower defaults on the loan.

How Long Should It Take to Pay Off A Business Purchase?

The time it takes to pay off a business purchase can vary widely and depends on various factors, including the size of the purchase price, the financing terms, the profitability of the acquired business, and your ability to generate cash flow. Here are some considerations that can influence the timeframe:

  • Financing terms
  • Cash flow
  • Profitability
  • Additional investments
  • Economic conditions

What Are the Risks of Buying a Business with Borrowed Funds?

Utilizing borrowed funds can amplify financial risk if the business underperforms. If the business’s earnings fail to cover loan repayments, it can lead to cash flow crises and, potentially, the loss of the business.

How Do I Determine the Right Business to Buy with Limited Funds?

Assess businesses in industries you’re familiar with, targeting those that may be undervalued or have potential for growth and operational improvements. Utilize the professional valuation services of a certified business appraiser to ensure the investment aligns with your financial capacity and business goals.

Are There Hidden Costs in Buying a Business?

Potential hidden costs can include unpaid taxes, undisclosed debts, and liabilities. Therefore, it’s always better to conduct thorough due diligence and consult with a financial advisor to uncover any hidden costs before completing the purchase.

Sum Up

The journey of how to buy a company with no money may seem challenging, but as we’ve seen, it’s far from impossible. With creative, strategic financing and the right guidance, the path to business ownership is well within reach. Platforms like Lendza can help you connect with a large network of lenders that offer a myriad of financing options, including business acquisition loans.


Ethan James   Lead Writer
Ethan James is an experienced Financial Writer at Lendza with over a decade of experience.