Have you ever heard of the concept of leverage? You definitely have. As a matter of fact, you already know how to use it. By using your credit card, you’re actually using other people’s money to purchase a desired item. You’re able to just sign your name to “borrow” for your purchase. So leverage is just a word for the simple idea of using “other people’s money”. It is no more complicated when you buy a business on leverage. Having adequate limits on your credit card can help you with the down payment on your business venture. Make sure you maintain a good credit rating. If not, hope is still there. HULT PRIVATE
Question: What other secret of starting or buying a business is available to the public?
Answer: Information, my friends, is the secret. The more information you have, the more powerful it will make you. You need no business ownership background or fancy education to start or buy a business without cash of your own. In fact, you might be better off without these typical preconditions, which can discourage you in reaching your goals. Research will help you find out more of these secrets. The information you will accumulate through your research will allow you to open your eyes to new opportunities out there. Where other people see obstacles, you’ll see a challenge.
Question: How simple is it to buy a business on 100% leverage?
Answer: It is as simple as A-B-C (under the following conditions):
A: The seller is willing to finance 70 to 100% of the purchase price, a concept that will be explained later.
B: Any remaining amount can usually be financed through the seller’s bank. Financing can also be
handled in a different way, with the bank picking up the largest share and the seller contributing the rest.
C: A business broker or a supplier to the business can also be called on to contribute to your no-cash deal. The idea is to build “stair-steps” of financing to reach your goal. It can be advantageous for a broker to get involved in the transaction. Most of the time, the broker represents the seller; however, if you approach him and request a specific business, he may find it for you. At that point, he’ll search around to see what business will best suit your interests. He will attempt to close the deal and can give you a temporary break on his commission. That doesn’t mean that you are exempt from repaying his hard-earned money. Your broker will give you a time frame in which to pay your dues. Within this time frame, the business will generate enough money to pay for all operating expenses, the first month of the bank loan, and the broker’s fee, including the seller’s advance on the down payment. This amount can be exonerated from the initial purchase of the business. You’re probably wondering when your six-figure salary will appear. Sacrificing income for the next few months will be necessary to get the business running. This applies to start-up Internet companies as well. The Chief Executive Officers are making a mere $200 per week, if they are lucky. However, their goal is to be purchased by a big corporation; and if this scenario happens, their time and effort will be worth their while.
Question: Is the seller going to accept this maneuver?
Answer: Why not? As long as you can make sure that the seller gets what he or she wants, one way or another. Buying a business on no-cash terms doesn’t necessarily mean the seller ends up with no cash. It’s just not your cash. The key is to know the leveraging possibilities you can bring to the table, and which to suggest for a given situation. You’ll discover a number of them in this book, as well as other leveraging techniques available in the program reports. I should point out that it’s somewhat easier to buy a business on leverage than to start one from scratch. As I mentioned earlier, you can often use the assets of the company as “other people’s money” to arrange a none-of-your-own-cash transaction.
Question: But what if I have a great start-up idea and need to start from scratch?
Answer: No problem. Organization will be to your advantage. The article will show you how to approach and win over bankers, prospective suppliers, venture
capitalists, and “Angel investors” as sources of funding for your idea. In addition, we can show you how to get started via a limited partnership, selling companies’ stock, going through the Small Business Investment Companies (SBIC), and using home equity loans. All of these methods will get you much more money than you could by your own means.
The Small Business Development Center in your area can be a great help to your new start-up. You should contact the SBDC (subsidized by the Small Business Administration) in your area and ask to talk to a business consultant.
They will provide you with additional information about the trends and demographics for where you reside. This can be vital information, especially if you desire to cater to the local residents. The government plays a major role in helping new start-ups, depending on several criteria provided in this article
Question: Can you give an example of how I would bring leverage to the bargaining table to buy a business?
Answer: Sure. Let’s take the example of our dear friend, Larry. Perhaps like you, he was more than ready to say goodbye to his day job and was extremely interested in going out on his own. His dream was to own a vending machine route, a business he had found stimulating and exciting. He also thought the business had great potential because of the possibility of servicing the student community. His concept was different.