While buying a business is a big step in the right direction compared to starting one from scratch, the biggest challenge comes in raising enough funds for the project. Competition for funds increases every day, which makes the chances of securing an investor slimmer every day.
Traditional lenders have become a problem and require you to fulfil so many unattractive terms, even after jumping through various hoops while trying to secure some funds. Investors and private lenders, on the other hand, have become extra cautious and have raised their standards. In such cases, the only thing left is to use your business common sense.
There are a few factors that determine your business financing, including the kind of project the business entails, the kind of partners and the business management. The best part is that you have numerous options at your fingertips and it is up to you to choose the best one based on your needs. Here is a look at some of the most common ways of raising funds to buy a business.
Your savings
Before you start looking for a business for sale, the chances are that you had already saved up enough money for the project. Even if you haven’t raised the full amount yet, then you probably have a percentage of it secured in your account depending on the size of business you wish to buy and how much it will cost you. You should prioritize the project and put your savings toward it before seeking additional financing.
Borrow from family and friends
Most entrepreneurs tend to shy away from this option. They feel like they will be burdening their friends or relatives with their financial problems but have you thought of the enormous advantage that comes with it? You should not view it as begging. Instead you should see it as a way of them lending a hand to someone they love. In the case of buying a business, try and professionally present your pitch just as you have done with other investors. You will be amazed by how much cash you can raise from these people who are genuinely willing to support your dreams.
Traditional lenders
This is by far the most common method among small businesses. However, you should note that it is also the most challenging option. You need to fulfill some terms for them to consider your request for a small business loan. For starters, the lenders will view your credit profile to ensure that you are in good shape to be trusted with loans. If you plan on buying a business someday and you intend on going through this means, then try as much as you can to build a good credit score. You also must have a comprehensive business plan in place to show them that you are ready to own a business and you have the potential to run it well, earn profits and pay their money back and more.
Crowdfunding
If you do not qualify for business loans, you have not saved up much, and you do not have any friends or relatives willing to help you, it is time to turn to well-wishers. There are organizations out there that are specifically meant to fund businesses. You only need to look for a reputable, successful company and ensure to check their terms and rates. You also need to set a goal for the funds you wish to raise within a specific period. You, however, should know that this choice is not suitable for long-term funding. Instead, it is meant it works best for small businesses.
Consider investors
Securing investors is not a walk in the park. You need to be really good at what you are doing to get one to consider you. You should have a clear plan and prove to them what makes your business idea unique and worth investing in. Pitch the idea and who knows; it could be what they are looking for.
This can also be helpful if you are looking to tap into a local community. For example, if you are looking to buy and revitalize a local area in Houston, Texas, consider creating a pitch around buying a business for sale in Houston. You might find a local investor who may consider your proposal on the basis of helping out the local community.
There are no silver bullets when it comes to raising money to buy and run an already established business. You have to apply the right tricks and tactics. Also, be careful with the choices you make, since after all, the primary purpose for purchasing it is to make profits. Consider the pros and cons of each and go for the option that has the most benefits for you.
By: Finsmes.com
FinSMEs. “Raising Funds to Buy a Business; What Are The Different Options?” FinSMEs, 23 Oct. 2018, www.finsmes.com/2018/10/raising-funds-to-buy-a-business-what-are-the-different-options.html.
