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Can I buy a business with little money down?

I am ready to take the next step of purchasing a business in the Iowa area. I currently have credit in the 600's and have about 5,000 down for the business. I would like to purchase something for around 200,000, but am I able to get a loan for the rest with little down?

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Answers (9)
Jon Holmquist
Edgemaster Model 400 sharpener
President
Marion County, OR

Hello Jon, that's my name too. Reminds me of a song. Small down, makes life difficult but not impossible. Suggest that you take a look at our offering just to see if it fits. Got a brother in Iowa, would love to have an excust to come see him. Thanks Jon at Edgemaster Mobile Sharpening.

Mar 10, 2010
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How to Buy a Business
WA

+1 to CB for a sound perspective. You need to educate yourself on what's possible. Over the past 20 years, I have seen some amazing deals happen that most people would have thought not possible. Never say never.

Mar 10, 2010
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Mr. Dreckman, historically, when the effort of acquiring a business with little or no money down was a hot thing, it wasn't that the acquirer worked some magic and smoothed-talked a seller into unloading his or her business with no consideration from the purchaser. As a 16 year veteran in the Private Equity industry, I have seen acquisitions that were credit driven, meaning the strength of the buyers credit to facilitate a transaction, or even using just a few thousand dollars to acquire a multi-million dollar company, but those were generally turn-around scenarios. The way most acquisitions that were truly no-money-down, as you say, were just well structured transactions which included the sale of certain assets as a part of the transaction, or the pledging of certain future revenue streams to the seller once the acquisition was complete that would have provided a tax benefit to the seller. All-in-all, a no-money-down transaction is, and can be a reality, but its generally just a well structured transaction that causes the purchaser to complete other simultaneous transactions at the closing, i.e. the sale of an unwanted asset to a third party at closing with the proceeds to be tendered to the seller as your equity contribution. As the first answer suggest, anything is possible, it all will depend on your level of creativity in your structure.

Mar 9, 2010
Jon Holmquist
Edgemaster Model 400 sharpener
President
Marion County, OR

Your request is a tough one but if we could come to an agreement, we might make it work better than you ever thought. Check us out at our web site. Thanks, Jon at Edgemaster Mobile Sharpening

Mar 9, 2010
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Hi Jon.

You can partner with my television studio, offering something every business will be buying from someone at some point soon -- HD videos for companies' websites. You'd be offering the highest quality videos in the United States, and saving your clients thousands of dollars. There's huge money to be made, and virtually no investment on your part -- only $2,995 total. Please check out www.MajorLeagueVideo.com.

Mar 9, 2010
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The BAF Group LLC
MD

The number of employees is not the question. It is the amount of the payroll, the schedule of the payrolling, the nature of the inventory (if applicable), the cycles of collection, the cycles of revenue, when you will buy the business in relation to Rent, Utilities and other routine expenses, etc. You need to look at the current owner's P&Ls for the past year, the Check Register would help, and REALLY understand what it will be like to manage the business on a day-to-day, week-to-week and month-to-month basis, BEFORE you commit.

Mar 8, 2010
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Dallas County, IA

Thank you very much for your insight! What do you think is a good amount to have in the bank before you buy a business with 7 employees?

Mar 8, 2010
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The BAF Group LLC
MD

I agree with Peter; however, the big problem is that, with as little as you have in the way of capital, even if you are able to purchase the business, can you continue to run it with no money to maintain and grow it. People think that they can just use the Cash Flow from the business itself, and they don't need to have any money available to fund the daily operations. But in the vast majority of cases, that is just no so!

You need to have cash available for payroll, payroll taxes, purchase of inventory, rent, security deposits on things like leased space, phones, utilities...that $5,000 is not going to go far. Is there seasonality in this business? Are there other cycles to be concerned about?

I have said it over and over again: The vast majority of businesses fail because they are poorly capitalized. Some businesses are more succeptable to this issue than others. You need to BE DAMNED CAREFUL and understand the nature of the business you want to purchase.

Mar 8, 2010
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How to Buy a Business
WA

That's going to be really tough. You need more cash in your war chest. But then the thing I have learned over the past 20 years is to never say "never." I continue to be amazed by the deals people do.

Mar 8, 2010

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