Buying a business with no money is a phrase for buying with other people's money on terms the business then has to meet. There are three sources in an ordinary small purchase: an SBA-guaranteed lender for the largest share, the seller for a note on the remainder, and, for some buyers, a retirement account rolled into the company. This page describes each source as the buyer meets it, its term, its rate and its claim on the business, and the one test all three sources apply.
The lender's share
An SBA 7(a) note carries the largest share of the price, 80% on the calculator's worked example, at a rate set off the market and a term of up to ten years for a purchase without real estate, or 25 where real property is acquired. On the example $360,000 at 10.5% costs $4,857.66 a month. The lender's test is coverage: earnings after the buyer's pay divided by the year's payments.
The seller's share
The seller note carries the part the bank will not fund. On the example $45,000 at 6% over 5 years costs $869.98 a month; doubled, it removes the buyer's cash on the price and adds $869.97 to the monthly bill. The seller's test is the buyer's credibility and the handover, because a seller holding a note has an interest in the business surviving them.
The one test everyone applies
Whatever the sources, the business must earn the payments after paying the buyer. The example's $180,000 of seller's discretionary earnings less $90,000 of pay leaves $90,000 against $68,731.68 of debt service, 131% coverage and $21,268.32 spare. Below 100% the deal funds the seller and starves the buyer, and no source of money changes that.
Questions people ask about buying a business with no money
Is buying with no money a good idea?
It is a description of a stack, not a recommendation. High leverage means the business carries more payment and the buyer less cushion; the coverage line is where that shows.
What about working capital and closing costs?
They are cash on the day whatever the stack. The example carries $40,000 and $25,000. Some of the working capital can sit inside the note if the lender agrees.
Does Keysvo lend or introduce lenders?
No. It works the arithmetic and, in Pro, keeps the stacks, targets and offers. Lenders are your conversation.