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Question – I want to buy a business but have no money down. Is there a way to buy it?  The seller is currently in poor health and won’t finance the entire purchase but would be willing to do 25%-50%.  This is a nice little profitable restaurant and he is only asking $95,000.  

One solution could be to have the seller hold 25%-50% of the sales price and let the bank finance the remaining.  The bank funds would go to the seller for the purchase of the business and you may be able to not have to spend money out of pocket to acquire it. Collateral may be an issue, so be sure to total up all of the equipment, furniture, fixtures, inventory, etc to see it that covers the $95k price tag.  Any collateral shortfalls will likely need to come from you personally.  Also be aware that the seller will be taking a backseat position to the bank and you typically won’t be able to pay the seller off faster than the bank.  This means if you have a 5 year loan with the bank, the seller will need to be paid back over 5 years as well. 

Trying to buy the business with no money out of pocket isn’t an easy way to go and many banks won’t do a loan without owner investment.  The banks that do may want additional personal collateral.