Self-Financing

• Many entrepreneurs begin their acquisition of a small business with their own financing. Taking out home equity or mortgage-based loans, cashing in retirement accounts, liquidating savings or investment accounts, and even charging some or all of the purchase price on credit cards are all means by which entrepreneurs can buy a business. Self-financing is especially important for new entrepreneurs without an established track record of previous business success.
  
  

Owner Financing

• In many transactions, the present owner of a small business helps to make the purchase work by extending credit or carrying some of the "paper" of the deal in the form of owner financing. Owner financing may constitute acting in the place of a bank and receiving monthly payments on a mortgage note or providing part of the price in the form of a loan. Owner financing also may simply include postponing the due date of some or all of the purchase amount until the new owner can raise the funds to complete the transaction.
  
  

Traditional Lenders

• Traditional lenders such as banks and mortgage brokers are also sources of small business purchase financing. Factors when trying to secure business financing from a traditional lender include your previous credit rating, enjoying an established and positive prior relationship with the lender, a track record of previous business success (especially in the same industry), and a detailed, professional business plan demonstrating that the business will succeed. Again, a traditional lender such as a bank may provide all of a purchase's financing or may be one component among several that are combined to complete the purchase.
  
  

The Small Business Administration

• The Small Business Administration provides loan guarantees to banks for small business acquisitions, as well as providing planning resources and guidance for the entrepreneur throughout the buying process. Local banks partner with the SBA to provide the loans, so factors such as a successful track record, an established business relationship, personal credit rating and a detailed plan for the business's success are still important.
  
  

Private Investment

• For entrepreneurs without the means to self-finance when traditional financing and owner financing are not available, securing private investment may be the best option for completing a small business acquisition. Private investment may take the form of a personal loan, a partnership or an equity stake in the business via selling shares. Family, friends, acquaintances, angel investors and venture capitalists are all possible sources of private investment. You should consult an attorney regarding the best private investment route for you before soliciting investments.