Business purchases are expected to rise through 2035 as a wave of baby boomers retire and hand over the keys to their small businesses. Most buyers don’t use a single source of money. Instead, they combine two or more of the following options:
Ways to finance a business | How it works | Consider if… |
|---|---|---|
You borrow money from a lender and repay it over time, with interest. | You want a set repayment schedule and the business generates enough cash flow to cover loan payments. | |
Seller financing | You pay the seller directly over time for part of the purchase price. | The seller is willing to accept payments over time and offers terms that work for your budget. |
Investors or business partners | You get money toward the purchase price in exchange for a share of ownership. | You don’t want to take on debt and are comfortable sharing profits and control. |
Personal savings | You use your own money to cover some or all of the purchase price. | You have a lot saved that you can invest without jeopardizing your emergency funds or retirement plans. |
How much do you need?
Ways to finance a business purchase
Here’s a deeper dive into the four main ways to finance a business purchase.
Small-business loans
Consider if: You want a set repayment schedule and the business generates enough cash flow to cover loan payments.
Pros
You retain ownership and control.
The purchase price is spread out over time.
Predictable monthly payments.
Cons
You still owe payments even if business slows.
Interest and fees increase the total cost of the purchase price.
Most lenders require a down payment, so you’ll still need cash upfront.
Also called “business acquisition loans,” small-business loans can help you spread out the cost of buying a business while retaining ownership and control. But you’ll have to demonstrate to the lender that you can pay the loan back.
In many cases, that means you might need:
A personal credit score in the mid-600s or higher (online lenders may be more flexible).
The business’s financial history, showing two or more years of profitability (or your current business’s financials, if you already own one and are buying a second).
A down payment of at least 10% to 20%.
Relevant business experience, and strong business and transition plans.
Here are popular types of business loans for buying a business:
Type of business purchase loan | Main benefits | Main drawback(s) |
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What if the business already has debt?
You may be able to take over some or all of the business’s existing debt as part of the purchase. This is called “debt assumption,” and it can lower the amount you pay the seller upfront. The lender must approve the transfer of debt, and this arrangement can add complexity to the transaction.
» MORE: Business acquisition loans
The best loans to finance a business purchase
| Product | Max loan amount | Min. credit score | |
|---|---|---|---|
 SBA 7(a) loan with NerdWallet Small Business | $5,000,000 | 650 | with NerdWallet Small Business |
 iBusiness Funding - Online term loan Nerdwallet Rating 4.0 with NerdWallet Small Business | $500,000 | 660 | with NerdWallet Small Business |
 OnDeck - Online term loan Nerdwallet Rating 4.9 with NerdWallet Small Business | $400,000 | 625 | with NerdWallet Small Business |
 National Funding - Online term loan Nerdwallet Rating 4.7 with NerdWallet Small Business | $500,000 | 600 | with NerdWallet Small Business |
 Triton Capital - Equipment financing Nerdwallet Rating 4.1 with NerdWallet Small Business | $250,000 | 575 | with NerdWallet Small Business |
Seller financing
Consider if: The seller is willing to accept payments over time and offers terms that work for your budget.
Pros
Can be easier to qualify for than a small-business loan.
Since you negotiate directly with the seller, you may be able to get very favorable rates and terms.
The seller has an incentive to help you succeed.
Cons
Not all sellers are willing (or able) to finance part of the sale.
Seller financing usually only covers 5% to 20% of the purchase price.
The asking price may end up being higher.
Instead of borrowing from a bank, you make payments directly to the seller over an agreed-upon time frame, typically financing 5% to 20% of the purchase price.
This type of financing is also called a “seller note.” It’s more flexible than a traditional loan, and repayment terms may be tied to the future performance of the business.
Because seller financing doesn’t usually cover the full purchase price, buyers often use it alongside other types of funding options. For example, you may be able to use seller financing to cover the down payment on a small-business acquisition loan.
Investors or business partners
Consider if: You don’t want to take on debt and are comfortable sharing profits and control.
Pros
You can raise money without having to pay it back.
You share the financial risk of the new business purchase.
An investor or partner may bring experience, connections or skills.
Cons
You give up a share of ownership and future profits.
It can take a long time to find the right investors or partners.
Disagreements can complicate things.
Investors or business partners contribute money toward buying the business without you having to pay it back. Instead, you give them a piece of ownership in the company. Beyond capital, investors or partners can bring experience and connections you wouldn’t have alone, and help lighten the load of running a business.
Without an existing network or a partner already in mind, it can be hard to find others willing to back your vision and potentially work alongside you. Family and friends are worth considering, too.
Personal savings
Consider if: You have a lot saved that you can invest without jeopardizing your emergency funds or retirement plans.
Pros
You retain full ownership and control.
No loan payments to worry about.
Personal savings are the simplest and fastest way to buy a business.
Cons
You’ll have less savings for emergencies and other goals.
You can lose the money you invest if the business fails.
Also called “bootstrapping,” using your personal savings is the simplest way to cover some or all of a business purchase without taking on debt.
But it is risky. If the business fails — which many small businesses do — you could lose some or all of that money. Before committing, make sure you have enough left for emergencies and your future retirement. Even if a business has a successful track record, it doesn’t guarantee it will stay that way.
Advantages of buying an existing business
A proven business model and existing customer base indicate clear demand for the company’s products or services. Having an established target audience and marketing plan can also make future advertising efforts easier and more effective.
You don’t have to hire all of your employees. Not only is hiring time-consuming, but it can also cost a lot of money to run background checks, recruit the right people and train them on company processes.
Systems are already in place. Trial and error is a major part of launching a business, but buying an established one allows you to bypass much of that learning curve. You’ll inherit operational tools that are already working — such as a point-of-sale system, accounting software and customer management platforms.
Disadvantages of buying an existing business
Past financial problems may complicate the loan application process, even if they happened under a different owner.
You’ll inherit existing issues, big and small. It'll be up to you to solve any hiccups with employees, operations and software and possibly even make up for past financial decisions that didn’t serve the business.
You’ll have to win over the staff. Existing staff may be wary of new leadership and push back on any processes you change.
Article sources
- 1.McKinsey Institute for Economic Mobility. The Great Ownership Transfer: A new era of business stewardship. Accessed Oct 12, 2026.
