How to Acquire a Business With Almost No Money Down
How to Acquire a Business With Almost No Money Down
Buying a business doesn’t always require writing a huge upfront equity check. With the right capital structure, buyers can leverage bank loans, mezzanine finance, and seller notes to fund most of the purchase price. The equity contribution still matters — but it can be smaller than many expect, especially when the seller and lenders believe in the continuity of the business.
Senior Bank Debt
Commercial banks are typically willing to lend between 40% and 65% of the enterprise value of a business, depending on cash flow stability and collateral. In the U.S., SBA 7(a) loans can cover up to 70–80% of a purchase price for smaller businesses, with extended amortization. For larger deals, leveraged buyout (LBO) structures often combine revolving credit facilities, term loans, and asset-based lending tied to receivables and inventory.
Seller Notes
Many acquisitions involve the seller leaving part of the purchase price in the business as a seller note. This can represent 10% to 30% of the deal value, subordinated to senior bank debt but often accruing interest. Seller financing aligns incentives, keeps the vendor invested in the buyer’s success, and reduces the buyer’s immediate equity requirement.
Mezzanine Finance
The gap between what banks will lend and the total purchase price can be filled by mezzanine capital. Mezzanine lenders provide subordinated debt or preferred equity, usually priced at 12%–20% IRR. In exchange, they may receive warrants or equity kickers. This layer is flexible: it allows buyers to close deals without injecting large amounts of personal cash, but it comes at a higher cost of capital.
Sponsor Equity
Even in highly leveraged deals, lenders want to see the buyer put some skin in the game. Typical sponsor equity is 10%–20% of the purchase price. For smaller buyers, this equity can be raised from private investors, family offices, or through search fund structures. In some cases, rolled equity from management or existing minority shareholders reduces the cash outlay further.
Example Capital Stack
| Layer | Typical Share | Notes |
|---|---|---|
| Senior Bank Debt | 50% – 60% | Term loans, revolvers, SBA 7(a) loans |
| Seller Note | 10% – 30% | Deferred payment, interest-bearing |
| Mezzanine Finance | 10% – 20% | High yield, often with warrants |
| Sponsor Equity | 10% – 20% | Cash equity, rolled management equity |
Structure Your Acquisition Financing
Financely helps buyers line up bank debt, mezzanine capital, and investor equity to close acquisitions with minimal upfront cash.
Contact UsFinancely is an advisory and placement firm. We are not a lender or issuer. All financings are subject to credit approval, due diligence, and executed documentation. Actual leverage levels vary depending on industry, cash flow, collateral, and sponsor profile.
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