If the business you're buying is making money, you may be able to obtain a bank loan to finance the deal. However, if the seller is willing to provide financing, this may be an even better option. Seller-side financing (often referred to as an "earn-out") allows the buyer to make a small downpayment--say, 10 percent of the purchase price--then pay out the rest over time.
Often, earn-outs are tied to the company's future financial performance, giving the former owner an incentive to teach you the business and retain loyal customers.
Question added to topic Money • June 11, 2008
I'm purchasing an existing convenience store. How do I finance this purchase? I need about $50,000.
I'm currently employed. Combined income for my wife and me is about $200,000 per year. Combined, our 401K accounts total approximately $250,000. The convenience store is housed in a Miami residential building of approximately 300 apartments, 90 percent of them occupied. I recently formed a corporation to purchase this business.