How To Buy A Business With No Money UK

The idea of buying a business without putting in any capital can seem like a pipe dream, but it’s actually closer to reality than people would imagine. Within the UK there are various options that a person can use in order to exercise total control over a given company without having to put in any significant sums of their own money. The No Money Down Guide: Acquiring a business using creative financing, leveraging existing assets or negotiating favourable terms with sellers-will take you through every step in the process.

1. Locate Motivated Sellers

First, motivated sellers need to be targeted. Here include those who are retiring, relocating, or in various personal or financial situations that require them to close a sale as fast as possible. More often than not, these sellers would accept offers with no or little capital up-front and even be flexible with terms.

You will find motivated sellers in industry networking, through online business marketplaces, such as BusinessForSale.com, or through direct contacts with local businesses who may be willing to consider an offer. Sometimes, a business is not listed for sale but the owner will entertain the possibility if offered the right circumstances.

2. Seller Financing

Among the most common ways in which a business can be bought using no money at all is through seller financing. Seller financing can be described as where you agree to pay for the business over time, not necessarily having to pay a big sum when purchasing it. In simple terms, you agree on a price and pay back bit by bit either monthly or quarterly until the whole amount is paid.

Seller financing also pays the seller. For you, it means you could buy a business without significant capital at the start. For the seller, it creates ongoing income and makes the business more desirable to other purchasers. To be successful in seller financing, you must negotiate favourable terms: extended repayment periods or low interest rates.

3. Leverage Earnouts

Another way of acquiring the business without paying any cash is by an earnout. Here, you agree to compensate the seller on the future performance of the business. For example, you may agree to pay the seller some percentage profits of the company over some upcoming years.

This structure is especially effective for companies that consistently generate cash flow and have shown a history of profitability. Earnouts are a win-win scenario: the seller will realise payments based on continued success of business, and you’ll get to buy without having to obtain financing.

But, of course, there are pitfalls in earning money. What if the business performs below expectation? It might be very difficult to pay the agreed terms. It would be wise to see to it that the business has a good financial prospect before getting into this kind of deal.

4. Asset-Based Financing

Asset-based finance is another way you can use the assets of the business to be acquired as a loan to purchase the business. Assets, thus, can be property and plant and equipment or even stock and receivables. In this method, the business’s assets are actually a form of security given on the loan, and the business can be purchased without the use of any of your own funds.

This involves borrowing against assets, and for those who do not have the capital required to buy a business outright, this can be a very practical means of acquiring an enterprise. Lenders would look for the guarantee that the assets in question have sufficient value for them to offset the loan made for this purpose, hence the need to prepare a proper estimation of the value of the assets of the business in question beforehand.

5. Partnership or Equity

To end, forming a partnership is almost an imaginative way of buying a business with no money. You are left with the value of your skills, knowledge, and your own management acumen in a business by partnering with someone who has the money.

When you’re making a deal, be clear on what you can put on the table and how you can help contribute to the business. It could be creating an idea of working every day, and the funding is from your partner. There is always room to make a legally binding agreement in case some differences arise in the future.

Or otherwise, you can give away the ownership in exchange for using equity. Here, you take a percentage of the company’s equity in exchange for managing the company. The seller, in this case, will retain some percentage of the ownership but not manage it any more. You can use the business profits to buy the remaining shares of the seller.

6. Use Other People’s Money (OPM)

That acquisition method using the concept of “other people’s money” or OPM is one tried-and-tested way of acquiring a business with limited to no capital at all. It merely involves using external financing sources, such as investors or maybe even private lenders, to finance your business acquisition.

For example, you find an investor to finance the purchase, but only on the condition that he be granted equity or a share of future profits. This type of move could be pretty effective; then you need a good pitch to convince investors that the business deserves this investment and that you are skilled enough to make it successful.

Another option is crowdfunding, perhaps through Crowdcube or Seedrs. Such sites enable you to pitch your business acquisition plan to a large audience of potential investors. If the idea works, then you can raise the cash without having to spend any money from your bank.

7. Utilise Grants and Loans

In the UK, small businesses and entrepreneurs are supported through grants and loan schemes by the government. Even though these will not finance the entire purchase of acquiring a business, they are enough to top up a business acquisition and hence reduce the amount of personal capital invested.

For instance, there are the Start Up Loans of the British Business Bank, which can provide up to £25,000 for new start-ups. Then there are also regional and sector-specific grants that fund buying a business in your particular industry. Conduct research to learn more about available grants and funding opportunities in your local area in order to utilise them.

8. Negotiate Deferred Payments

The other approach to purchasing an enterprise without initial capital is deferred payments. In this case, you agree with the selling party to delay the payments to some future date when the enterprise would have gained enough income. Essentially, the seller is allowing you to take control of the business today but promises to make payments in the future.

This is especially good when the business has a good cash flow and has open, immediate revenue-generating opportunities. As with this method, you are assuming ownership and using the earnings of the business to finance the buy. However, you would have to negotiate good terms so you don’t get drowned under payments when the business has not had the chance to grow.

Conclusion

Now you know how to buy a business with no money in the UK is not impossible. Sometimes, it can be bought with limited personal capital with innovative financing options, including seller financing, earnouts, asset-based loans, or even partnerships. That business can often be bought with resourcefulness and an understanding of the value of the business translated into negotiating favourable terms. If you have some kind of resource but no money in hand, then, with proper planning and the right approach, this can easily become a reality.