It's rare that a buyer has enough cash to buy a business
outright, so traditionally they have relied on a variety of sources to
finance the purchase. If you're in the market but faced with a lack of
capital and no clear idea of where to start, consider the following
financing options:
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Peer to Peer Lending Networks
If you're unable to access bank capital to finance a small business purchase, one alternative is to turn to peer to peer lending networks. These networks remove the involvement of traditional lending institutions, instead allowing lending transactions to take place directly between individuals.
Friends and Family
Borrowing money from the people you're closest to in life is probably the longest standing method of funding entrepreneurial endeavors. Many people are hesitant to borrow money from friends and family for fear of straining personal relationships, but if you make it a point to hold up your end of the deal under all circumstances and borrow only from individuals who are in a position to lend without risking their own financial health, it can serve as one of the most effective ways to fund a business.
Seller Financing
Today, more and more business for sale transactions
are resting on a seller's willingness to finance at least part of a
sale. In a deal that includes seller financing, the seller takes part of
the purchase price in cash and the remainder in the form of a
promissory note that the buyer will pay back with interest over a period
of three to five years.
This has become essential in a time when buyers are
having difficulty accessing funds through traditional methods, therefore
naturally gravitating toward seller financed businesses to help offset
some of the cost up front. Sellers who continue to say no to seller
financing are finding it difficult to close a deal, and as more of them
have realized this, there has in turn been an increase in seller
financed businesses on the market.
If you're in the market for a small business it's
important to be aware of these alternate funding options, but also know
that in some cases it is still possible to borrow from a bank.
Government stimulus and bank policy have been trying to promote ongoing
small business lending, although many banks are still more conservative
than they used to be about to whom and when they'll loan money. If
you've inquired and are unable to secure a bank loan, though, taking
advantage of one or more of these financing methods could still allow
you to achieve the goal of being your own boss.
Today's business for sale marketplace is full of
exciting opportunities that would allow you to take your destiny into
your own hands, and with various options available there's no reason to
let a shortage of traditional capital sources get in the way of your
dreams.
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