Sunday, August 28, 2016

How to Buy a Business with NO MONEY- Should you? David C Barnett

How to buy a business with NO MONEY?

I’ve gotten some questions from viewers asking how they could buy a business with no money. 
There is a belief out there that if you can structure things correctly, it’s possible to buy a profitable business while using none of your own money.

I’ve done deals where a buyer borrowed all the money to buy a business, but they did so by putting up some personal assets as collateral.

I’ve done deals where a buyer gets a seller to essentially finance 100% of the purchase, but the buyer was using lots of their own money to improve the business with a short timeline to re-financing it. 
In both cases, we can hardly say that the buyers had ‘no money.’  They certainly had resources to help them make the deals happen.

I made this video to explain the different scenarios that someone might conceivably buy a business with no money and the dangers for the buyers and sellers in each. Watch:

In asset purchases, the danger for a buyer, even if there is no down-payment, is that there will be insufficient operating capital and you’d be in a cash flow crisis from day one.

In share deals, if there is a net-positive operating capital balance, the buyer could fleece the company and run away with cash and the seller would be left with nothing.  Who would put themselves in this kind of position other than a parent handing over a business to a child?

The one opportunity for buyers to get their hands on a business with ‘no money’ is usually when there is negative equity.  Watch the video to see my thoughts on this.

If you’d like to learn how to create high returns by making local private lending and lease deals, check out The Local Investing Academy starts in September.  For a quick introduction, read Invest Local.  It’s available from Amazon stores worldwide or as a .pdf here:

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Do you live in Toronto or the Maritimes?  I’ve got workshops coming up for Toronto in September on buying and selling businesses and in October-December in the Maritimes.  Book now

Thanks and I’ll see you next time. 

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