Ask Entrepreneur

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.
More Questions from Finance & Accounting

Search Answers



Have a burning question? Ask now!

Featured Video


Meet the Experts