How to buy an existing business with no money

Cash you need at the keys: $110,000
SBA 7(a) note: $360,000
Seller note: $45,000
Your cash on the price: $45,000

The only constants in these sheets are the two payment tables: the monthly payment per $1,000 borrowed over 10 years and over 5 years, at half-point rates between 3% and 15%, computed from the standard amortisation formula. Every other number is worked from the figures you enter: the price, the shares, the rates, the earnings, the documents and the days, with the arithmetic printed beside each answer. The 10 year term is the longest an SBA 7(a) note runs for a purchase without real estate; the defaults are one buyer's worked example, not a price guide and not a lender's offer.

Your numbers

Purchase price, $ SBA 7(a) loan, % of the price The share of the price the bank lends on an SBA 7(a) note. Enter what your lender offered; 80 is a worked example, not a rule.Seller note, % of the price The share the seller carries as a note you repay after the keys. Push it to 20 with the loan at 80 and the buyer's cash on the price is zero.SBA note rate, % a year Half-point steps between 5 and 15. The note is amortised over 10 years, the longest 7(a) term for a purchase without real estate.Seller note rate, % a year Half-point steps between 3 and 12. The seller note is amortised over 5 years.Working capital at the keys, $ Payroll, rent and stock before the first month's takings clear.Closing costs, $ Lender fees, legal, valuation, licences and transfer taxes.Seller's discretionary earnings, $ a year Profit before the owner's pay, interest, depreciation and one-off items, from the seller's tax returns.Your own pay from the business, $ a year

The figures start from a worked example ($110,000) and every answer is worked from the figures you enter: put your target's own price, terms and earnings in and read yours.

Download the How to buy an existing business with no money worked example (CSV)

The Keysvo workspace showing three costed targets on the register, each with its asking price, the funding stack kept from the acquisition cost calculator and its status from Looking to Offer made. — Pro keeps every funding stack you cost, beside the target it belongs to and the offer it led to.

This is the funding stack, and it answers how to buy an existing business with no money in the only honest way: by showing what money the purchase actually needs and where each dollar comes from. Enter the price, the share an SBA 7(a) lender will finance, the share the seller will carry as a note, the rate on each, the working capital and closing costs, the seller's discretionary earnings and the pay you need to draw. It returns the bank note and the seller note, your own cash on the price, the cash you need at the keys, the monthly payment on each note over 10 and 5 years, the debt service for the year, what is left after your pay and the coverage the lender will read. The figure to argue over is the seller's share: move it from 10% to 20% with the bank at 80% and your cash on the price is zero, which is what buying with no money means in practice, with working capital and closing costs still to be found.

The stack, off the price and two shares

$450,000 with the bank at 80% and the seller at 10% is a $360,000 SBA note, a $45,000 seller note and $45,000 of your cash on the price. With $40,000 of working capital and $25,000 of closing costs the cash at the keys is $110,000; enter your lender's share and your seller's and the stack follows.

The payments, from the two tables

At 10.5% over 10 years the SBA note is $4,857.66 a month, and at 6% over 5 years the seller note is $869.98. That is $5,727.64 a month and $68,731.68 a year the business owes before you are paid, which is the number the lender's underwriter is really buying.

What is left, and the coverage

$180,000 of seller's discretionary earnings less $90,000 of your own pay is $90,000 available for debt service. Against $68,731.68 that is 131% coverage and $21,268.32 of cash left in year one. Move the seller note to 20% and the cash on the price is zero, but the payments rise and the coverage falls, which is the trade the sheet is for.

What buyers ask before they trust the How to buy an existing business with no money

Can the buyer's cash on the price really be zero? On the sheet, yes: an 80% bank note and a 20% seller note leave nothing of the price for the buyer. Lenders usually want to see some of the buyer's own money in the deal, so treat the zero as the negotiating end of the range and read the cash at the keys line, which still carries working capital and closing costs.

Where do the monthly payments come from? From two tables of the monthly payment per $1,000 borrowed, one over 120 months for the SBA note and one over 60 months for the seller note, at half-point rates. The 10 year term is the 7(a) maximum for a purchase without real estate; your own note's schedule governs.

What is the coverage line? Earnings after your pay divided by the year's debt service, as a percentage. On the worked example $90,000 against $68,731.68 is 131%. Below 100% the business cannot make its payments and pay you, and a lender will read the same figure.

Where the constants in this tool come from

SBA: 7(a) loans, program overview and maximum loan amount.

SBA: 7(a) loan program terms, conditions and eligibility, maximum maturity.

Keep this purchase in Keysvo Pro, $14 a monthEvery target, offer and document in one register. $14 a month.