10 Tested Methods | Buying a Business with literally no Money
You Finally found your dream route business you would like to buy, you did your homework on it and now it's time to figure out how to buy a business with no money or how to at least get financing for your route business, First thing is don’t panic! Below I wrote you 10 backup plans that you may have when it comes to finding financing for a route business, when people think of bank loans they think of paper works documents months and months of back and forth but it doesn’t have to be that complicated, it all depends on the institution you chose to work with, getting approved for a business loan is a good thing, it builds your business credit and once you pay it off than getting a second loan shouldn’t be that hard.
Let us say you found a vending machine business route for sale and they wanted 100 thousand for it, you put up 50% and the bank loaned you the rest, they gave you a 36-month loan at a 6% rate, you now finally own a vending machine business, business is booming and profit is coming in, you paid off that loan in 16 months! Now you are ready to expand and find a second business to add to your portfolio you contact the same bank and ask them for a loan, they will check your new score and see you are a return client…you get my point by now getting a business loan is a great thing which leads me to my 8 ways to get route financing...
Business loans: As I discussed above getting a business loan for a route business can be very beneficial, if you are considering a loan term growth and owning multiple businesses then the least you can do is try to get approved, even if you don't get approved for the full amount try to get the most you and cover the rest with your own money or try to finance the rest from seller which leads us to number 2…
Owner financing: This is my number 2 on how to buy a business with no money it worked for me once and it may work for you too! owner financing has become very popular amongst sellers of businesses, running a business can become a full-time child that needs to be cared for, watched monitored around the clock, unlike real estate, selling a home is no rushing matter but with a business when the owner wants out then every day is crucial so they offer some money down and the rest financing, but keep in mind not all sellers will offer owner financing for route business but you can always ask the agent representing the business if they are willing to do so.
wholesale financing: Here is a good one that most people don’t consider, depending on which route business you want to buy, but let's say you decided to buy a distribution business and the previous owner was buying from the wholesaler X amount of dollars a year, you can always get the funding from the wholesaler in exchange for a guarantee that you will exclusively purchase from them for a set amount of years, this secures both your funding and the wholesaler supplying you, he will get paid back and will also keep your business.
Family funding: We all try not to go to the family when it comes to borrowing, but sometimes when the time has come and all doors have closed then it wouldn't hurt to open up that family album and start making calls, if you have a business that you like and the numbers are right and no red flags are triggered then you should ask for a loan from your family members, and its make some conditions to benefit them so they will be willing to help…like a contract!
Silent investor: A silent investor is someone who can take a certain percentage and stay completely out of business, that's if the returns are coming in, even tho he or she is a silent investor they still have the right to check numbers, what came in and what came out, building a good relationship with a silent investor may benefit you long term as you can grow larger knowing you have the right backing.
Credit cards: When the going gets tough, it's credit card time. If you have decent credit but not enough to get approved for a business loan you can always contact your credit card companies to increase your credit limit if you have 10 cards and they increase them each you will have a good amount, just don't get caught up in debt.
Equipment financing: This may only work if you are trying to figure out how to buy an existing business with no money or own a business with some kind of equipment, This is very common for private equity firms but here's an example lets say you own or purchased a trucking company and you have a fleet of 4 trucks you can try to get a loan off the paid off trucks, then use that loan to pay off any family debt or credit cards with high interest.
Partnership: Trying to figure out how to get financing to buy an existing business can be frustrating and when you tried everything up your sleeve you can always consider getting some partners involved, A partnership can be good and bad depending on what the structure is if you and 2 others are going in a third each then that will remove the weight of taking all that debt but it can be frustrating later on if one of the partners is the only one doing the work while the others aren't, so make sure everything is on paper for example who will do what, who will manage to finance and who will manage sales, these are all crucial steps to take in the very beginning of any business partnership.
Finding a less expensive route: If you tried all the above and still aren't having any luck then take it down a notch and start small, finding a business that cost less and can grow, low-risk high reward… if the route business has potential and you can afford to buy then that will work out in your favor. If done correctly that can become a huge profit for you once you are ready to sell it later on.
Saving up: WELL WE TRIED RIGHT? Saving up your money is the smartest way to go, try putting away a certain amount of money, if you want to buy a route business for 100K try to save up at least 75K and for the other 25K you will figure it out with one of these above
If you do decide to take out a loan and try to find ways how to buy a business with no money, you will need to know the ups and downs of taking out a loan, we put this list to help get you an idea of what to expect when trying to buy a business with no money and getting 100% Financing.
Pros and cons of getting a business loan – Here is all you need to know
Pros Of Getting A Business Loan
If you are determined in buying an existing business with no money and you decided to go with a business loan then you must read this, Obtaining a loan for a small business may be beneficial in many different ways. Consider the following few options:
Quicken Your Company's Expansion
A business loan, when handled properly, may help kickstart your company's expansion. Instead of waiting until the business has made enough profit to support development on your own, a business loan may help you get started on your goals faster...
You don't have to dilute the equity to get a loan from a financial institution
Without the need for outside investors, a business loan may provide much-needed capital. This allows you to maintain complete control of the business and all of its revenues as it expands. Every year your business is open, and earning money means that the investor gets a cut of what you make. Loans, on the other hand, are only a band-aid solution. Paying off the loan means you will no longer be obligated to repay the lender.
Overcome the problem of cash flow
Every small business can have a cash flow problem. When a small business experiences quick expansion, this is particularly typical since you may need to hire more personnel and purchase more equipment and supplies before being paid. These swells may be tamed with a loan.
Adaptability of Funding
An investor may have a voice in how you spend the money you get and may impose limits on what it can & can be used for. Loans from lenders are often unrestricted in terms of what you may do with the money, as long as the loan is not for company equipment or real estate.
It may be less expensive than other borrowing options
Credit cards, overdrafts, and personal loans aren't always the best options for getting the money you need. Even if the business has been in existence for a long time and has a great credit record, or you choose to receive a secured loan, both of these options may help you achieve a cheap interest rate.
Cons Of Getting A Business Loan
When it comes to a loan for a business, there are many benefits as well as a few drawbacks. Before making a decision, give these considerations some thought.
1. The lengthy process of application
Because commercial lenders issue loans based on your company's capacity to pay, they usually request a lot of documentation throughout the application process. A business strategy, 2 or 3 years of tax returns, and financial statements are likely to be required in addition to a completed application for funding.
2. Your Assets Could Be Damaged if You Don't Pay Your Bills
It's not uncommon for banks and other financial institutions to demand collateral from small-business owners to safeguard against default. If you pledge a company asset as collateral, you risk losing that item if you fail to repay the loan. Personal purchases (such as a home) are sometimes required as collateral for new businesses. As a result, you can lose your house in this situation.
3. The Strength of Your Credit Score Is Crucial
Typically, interest rates are influenced by your credit score, which includes both your business and your credit. If you can qualify, banks frequently offer cheaper interest rates than alternative sources of credit. You may be forced to pay extra for your loan with a less-than-stellar credit score.
4. There's a possibility that you won't get your money
When it comes to business loans, the underwriting procedure often takes longer than it does for other loans. Loan approval and financing might take months for the highly sought-after SBA loans (supported by the US Small Business Administration). A business loan may not be the ideal choice for your company if you need money right now.. now.
5. No room for wiggle room in repayment terms
Most commercial business loans have strict conditions. An agreed-upon quantity of money will be borrowed, and you will be required to pay it back within that time limit. A recurring monthly payment may not be the best option if your small business's profits are volatile.
Conclusions: We hope one of these options will help you secure financing for your route business, it can be stressful and hard but there are so many options as I listed above, and if none of those 10 don't work out then here's an option 11 start your own business and build it from the ground up! It may take time and long hours but if you have the skills and sales drive you to make it, finding ways how to buy a business with no money is a puzzle that can be solved if you play your cards right and financing for route businesses or any business, in general, can be overwhelming, that is why we made this article to help you go over the checklist one by one.
To the best of our knowledge, the information provided on this website is not intended to be taken as professional financial advice. Consult a professional financial or tax expert if you require this advice.