Financing a Business Purchase

Ideas for where to look for funding.
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Short on cash? Try these alternatives for financing your purchase of an existing business:

  • Use the seller's assets. As soon as you buy the business, you'll own the assets-so why not use them to get financing now? Make a list of all the assets you're buying (along with any attached liabilities) and use it to approach banks, finance companies and factors (companies that buy your accounts receivables).
  • Bank on purchase orders. Factors, finance companies and banks will lend money on receivables. Finance companies and banks will lend money on inventory. Equipment can also be sold, then leased back from equipment leasing companies.
  • Buy co-op. If you can't afford the business yourself, try going co-op-buying with someone else, that is. To find a likely co-op buyer, ask the seller for a list of people who were interested in the business but didn't have enough money to buy. (Be sure to have your lawyer write up a partnership agreement, including a buyout clause, before entering into any partnership agreement.

Excerpted from Start Your Own Business: The Only Start-Up Guide You'll Ever Need