Buying a business or franchise can be one of the smartest moves you ever make. You are stepping into ownership with systems, customers, and revenue already in place. But for most new entrepreneurs, the biggest question is simple: how do you pay for it? The good news is that there are multiple financing options available for people ready to buy an existing business or invest in a franchise. You do not need a pile of cash to become a CEO. You need strategy, preparation, and the right mix of funding sources. Here is a detailed guide to help you understand every major financing option available and how to choose the one that fits your situation best.
Traditional Bank Loans
Buying a business or franchise can be one of the smartest moves you ever make. You are stepping into ownership with systems, customers, and revenue already in place. But for most new entrepreneurs, the biggest question is simple: how do you pay for it? The good news is that there are multiple financing options available for people ready to buy an existing business or invest in a franchise. You do not need a pile of cash to become a CEO. You need strategy, preparation, and the right mix of funding sources. Here is a detailed guide to help you understand every major financing option available and how to choose the one that fits your situation best.
SBA 7(a) Loans
Buying a business or franchise can be one of the smartest moves you ever make. You are stepping into ownership with systems, customers, and revenue already in place. But for most new entrepreneurs, the biggest question is simple: how do you pay for it? The good news is that there are multiple financing options available for people ready to buy an existing business or invest in a franchise. You do not need a pile of cash to become a CEO. You need strategy, preparation, and the right mix of funding sources. Here is a detailed guide to help you understand every major financing option available and how to choose the one that fits your situation best.
Seller Financing
Seller financing is when the current business owner agrees to finance part of the purchase price. Instead of paying the entire amount upfront, you pay a down payment and then make monthly payments directly to the seller for the remainder. This can be a win-win. The buyer gets easier access to ownership with less need for a traditional bank loan, and the seller earns interest while spreading out their capital gains tax. Seller financing typically covers 10 to 40 percent of the total deal. The key is negotiation and trust. You will still want to have the agreement formalized with legal contracts and include protections for both parties. If the business has consistent cash flow and the seller believes in your ability to lead it, this can be one of the most flexible and relationship-driven forms of financing available.
ROBS Plans (Rollover for Business Startups)
Seller financing is when the current business owner agrees to finance part of the purchase price. Instead of paying the entire amount upfront, you pay a down payment and then make monthly payments directly to the seller for the remainder. This can be a win-win. The buyer gets easier access to ownership with less need for a traditional bank loan, and the seller earns interest while spreading out their capital gains tax. Seller financing typically covers 10 to 40 percent of the total deal. The key is negotiation and trust. You will still want to have the agreement formalized with legal contracts and include protections for both parties. If the business has consistent cash flow and the seller believes in your ability to lead it, this can be one of the most flexible and relationship-driven forms of financing available.
Home Equity Loans or Lines of Credit
If you own a home, you can leverage your equity to fund your business purchase. A home equity loan gives you a lump sum of money at a fixed interest rate, while a home equity line of credit (HELOC) provides flexible access to funds as needed. The advantage is that these loans often come with lower interest rates than unsecured business loans. However, your home serves as collateral, which means you are taking on personal risk if the business struggles. This option is best for people with strong confidence in the business they are buying and a clear repayment plan. Always consult a financial advisor before using personal assets for business purposes.
Private Investors or Partnerships
Sometimes the fastest path to ownership is finding someone who believes in your vision. Private investors, also known as angel investors, can provide funding in exchange for equity, profit-sharing, or partial ownership. You can also form a partnership with someone who has complementary skills or deeper pockets. For example, you might bring operational expertise while your partner contributes capital. The key is to formalize everything in writing with a lawyer’s help. Partnerships can be powerful, but they require transparency, trust, and clearly defined roles. This option is especially appealing for professionals with a strong track record who want to buy larger businesses but need more capital than traditional lenders will offer.
Venture Capital or Private Equity
While less common for small business purchases, some venture capital or private equity groups focus on small business acquisitions. These investors typically look for businesses with growth potential that can scale quickly. They often invest in exchange for partial ownership and may want a say in management decisions. For first-time buyers, this route can be challenging to access unless you are acquiring a high-growth company or have a proven track record in management. However, for larger deals or multi-unit franchise purchases, private equity can be an excellent strategic partner. They provide capital, expertise, and operational support to help you scale faster.
Crowdfunding or Revenue-Based Financing
In recent years, crowdfunding and revenue-based financing have emerged as creative ways to fund business purchases. Crowdfunding platforms such as Fundable or StartEngine allow you to raise small amounts of money from many individual investors. In exchange, you may offer equity or future revenue shares. Revenue-based financing allows you to borrow money and repay it as a percentage of your monthly revenue instead of fixed payments. This approach aligns with your cash flow and can provide flexibility for seasonal businesses. While these methods require strong marketing and a compelling business story, they can be effective for entrepreneurs with strong networks or social media followings.
Microloans and Community Development Lenders
If you are buying a smaller business or need less than fifty thousand dollars in financing, microloans are worth exploring. Organizations such as Accion Opportunity Fund, Kiva, and local community development financial institutions (CDFIs) specialize in helping small business owners, women, and minority entrepreneurs access capital. Microloans typically have easier qualification requirements than traditional bank loans and offer mentorship or technical assistance as part of the program. These lenders focus on building economic opportunity in local communities, making them a great resource for first-time business buyers.
Combining Financing Options
Most successful buyers do not rely on a single financing source. Instead, they combine several methods to create a package that works for their situation. For example, you might use an SBA 7(a) loan for 70 percent of the purchase price, seller financing for 20 percent, and personal savings for the final 10 percent. Combining funding streams allows you to reduce risk, improve approval odds, and create a balanced capital structure. When structuring your financing, make sure to include a cushion for working capital. Owning a business means unexpected expenses, and you do not want to run out of cash during the transition period.
Preparing to Secure Financing
Before you approach any lender or investor, preparation is key. Create a detailed business plan that explains why the business you are buying is profitable, how you will maintain or improve operations, and how you will repay any debt. Include realistic financial projections, market data, and a strong management summary that highlights your leadership experience. You will also need a personal financial statement, proof of liquidity, and tax returns for at least the last three years. The more professional and complete your presentation, the faster lenders will take you seriously.
The Money is Out There
Financing a business or franchise purchase is not about luck; it is about strategy and preparation. There are dozens of ways to fund your ownership journey once you know where to look and how to position yourself as a qualified buyer. You do not need to have all the money upfront. You need vision, discipline, and a plan. Whether you use a traditional bank loan, an SBA program, seller financing, or creative options like ROBS or microloans, ownership is within reach.
Join the Next Act CEO Summit
If you are ready to take the next step toward business ownership, join me at the Next Act CEO Summit. This three-day virtual event will teach you how to find, finance, and buy an existing business or franchise, even if you do not have a bag of cash. You will learn from experts in funding, acquisitions, and entrepreneurship through acquisition who will walk you through every step of the process.
Reserve your seat today at SmallBizLadyUniversity.com/NextActCEOSummit and discover how to turn your experience into ownership. The capital is out there, and your next act as CEO is waiting.