Help & How-To

Finance & Accounting
Would it be better to put down 20 percent, 33 percent or 50 percent toward the purchase of an existing business?
I am looking at purchasing an existing business with a good history, and I want to maximize my leverage. I have no debt and don't need to take that much money out of the business. I would prefer lower payments and lower financing with a balloon at the end of five years. Then I could use the profits from this business to continue buying other businesses.

Asked by venom5809
Posted: Saturday, June 07, 2008  |  Found in Finance & Accounting


More answers by Rosalind Resnick
Answer by Rosalind Resnick
While leverage can maximize your returns, it can also increase your risk. While putting down less money to buy a business will free up capital to acquire other companies, that strategy may backfire if the first business runs into problems and fails to generate the cash flow you're expecting. Your strategy may also inflate the prices of the businesses you acquire since sellers who are willing to accept less money now are probably going to demand a bigger payout down the road. 
Rosalind Resnick is the founder and CEO of Axxess Business Consulting, a New York consulting firm that advises startups and small businesses.


Recent Articles & Resources
Insight from Business Experts
What You Can Learn From Hollywood
Scott Kirsner spent the last three years immersed in the movie industry in order to write a book called Inventing the Movies: Hollywood's Epic Battle Between Innovation and the Status Quo, from Thomas Edison to Steve Jobs. He talked with directors like Francis Ford Coppola and James Cameron, editors, cinematographers, ...

McDonald’s: Local Footprint, Global Reach
Have you ever wondered if you could order a McHuevo in Uruguay? Yes, you can -- but if you're an American touring Bombay or Delhi, for instance, you might well ask, "Where's the beef?" Due to the religious beliefs of many Indians, there won't be any! Instead, ...

Planning, Prepping, Buckling Down, Taking Action
The American Express OPEN Small Business Monitor recently conducted its semi-annual survey of small business owners. And it seems that small business concerns about the economy hit a 7-year high. The survey is thorough and brings to light details about what's really going on inside the heads of ...

Voices of Small Business: What Owners Are Saying
Open Forum editors are visiting small businesses to ask how they’re handling the economic challenge.  Here are the stories of four businesses in New York City, reported by Bill Brazell. A Salon Focuses on Customer Service Santa Cruz, founder of Salon Santa Cruz, is proud to have kept her business going on ...
Have a burning question? Ask now!

Meet the Experts