How To Buy a Business for Zero Out of Pocket

How To Buy a Business for Zero Out of Pocket

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In this episode, "How To Buy a Business for Zero Out of Pocket," Beau discusses purchasing strategies without requiring a substantial upfront investment. He emphasizes the importance of becoming a skilled deal-maker and leveraging other people's money to unlock opportunities.

The first strategy presented is utilizing high-leverage SBA (Small Business Administration) financing. Beau provides an example of a tree trimming business with a total purchase price of $800,000, where $600,000 is allocated for real estate and $200,000 for the business itself.

The next step involves making an offer and exploring the possibility of seller financing. The goal is to secure an SBA loan that covers 90% of the total project costs, including SBA fees, loan fees, working capital, and the purchase price. With this financing structure in place, combining SBA financing with seller carry-on standby and an equity partner allows for acquiring a cash-flowing business without a substantial out-of-pocket investment.

The cash flow generated by the business can be used to repay the SBA loan, pay the seller's carry, and provide returns to the equity partner. Over time, excess cash flow can be used to pay down debts or refinance and exit existing agreements. Beau suggests various ways of structuring seller finance deals, aiming for a 90% loan-to-cost financing from the SBA and negotiating a 5% seller carryback on standby. He also mentions using gifted funds or borrowing against a HELOC (Home Equity Line of Credit) for the required 5% contribution. The episode concludes by summarizing the strategy of acquiring a business with zero out-of-pocket and inviting viewers to like, subscribe, and look forward to future episodes.

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Timestamps:
(00:30) The importance of becoming a great deal maker
(00:40) Strategy 1: When you are starting with limited funds, unlock opportunities that would seem out of reach
(00:52) Strategy 2: High-leverage SBA financing
(01:05) Example scenario: Tree trimming business for sale
(01:30) Exploring seller financing and securing an SBA loan
(02:15) Benefits of the strategy: Acquiring a cash-flowing business with minimal investment
(02:46) Utilizing cash flow to repay loans and provide returns to partners
(03:25) Various ways to structure seller finance deals and potential refinancing
(03:48) Bringing in an investor partner to cover the remaining project cost
(04:18) Exploring alternative options for the required investment
(04:32) Book a call at http://bookwithbeau.com/
(04:42) Helping you to quarterback the deal and find the right bank credit union or non-bank SBA partner lender.

💥 Thanks for watching 💥
#Purchasingstrategies #sbafinancing #SBAloan

About Beau: Beau Eckstein is a real estate entrepreneur, TV personality, and commercial mortgage advisor, specializing in construction financing and multi-family lending.

🎥 The video interviews we do on IFP will help you scale your real estate business and learn how to finance all your projects.

About the Channel: Want to structure your investments in the right and secure way?

Learn great insights and make the right decisions through the Investor Financing Podcast hosted by Beau Eckstein.