Can You Buy A Business With No Collateral?
While this is a US-centric article, what with its “incentivize” spelling and numerous mentions of the SBA, the question is still valid. Can you buy a business despite having no capital with which to make the purchase?
This article argues that you can and explains the US Small Business Association’s 7(a) program. But it also goes on to talk about seller financing and other ways to pay for the acquisition …which may be of interest to those outside of the US.
There seem to be several courses around purporting to teach people how to get their hands on “valuable” businesses without investing a single dollar of their own money. 100% seller financing is what they call it. Be cautious about such claims. It isn’t easy to find a business owner willing to hand a business over for nothing more than a promise to pay some money in the future. And when/if you do, the chances are that the business isn’t a very good one.
One possible avenue for buying a business with zero collateral is to opt for the SBA’s 7 (a) program, which works to incentivize the bank to make a loan to a prospective buyer. Under this program, the SBA guarantees 7%. The buyer still has to put in 25%; however, this money doesn’t necessarily have to be his or her money. This is where things really get interesting. The cash that the buyer uses can come from investors or even be a gift from parents in the case of young buyers. These possibilities all fall within the SBA’s guidelines. Can I Buy a Business With No Collateral