Finance options for purchasing a small business

Purchasing an existing small business may be a good way to fulfill dreams of being your own boss. But where does the money come from to purchase it?

The best way to have access to funds is to have collateral. Equity in a home is often one of the best resources. If that is not a possibility, here is a list of funding options that you may want to consider for brainstorming purposes. I hope you find it useful.

Traditional funding sources:

• Self financing
• Family and friends – use caution
• Private investors – referred to as “Angels” and “Deep Pockets”
• Banks
• Asset-based lenders
• Government sources

- Small Business Administration (SBA)
- Small Business Investment Company (SBIC)
- State programs
- City programs

• Suppliers (through extending credit)
• Leasing companies
• Insurance sources

Alternative funding sources may include:

• Barter
• Landlord
• Contract sales
• Other people’s credit
• Future commitment
• Unsecured loans through:

- Credit cards
- Credit unions

• Customer financing through:
  - Membership financing
  - Advanced payments

Consider these factors when selecting a source of funds:

• Availability
• Rate of Return
• Acceptable levels of risk
• Timing and form of return
• Amount of control desired