Let's discuss no money down 100% seller financing. Can you buy a business like this? What follows are some follow up thoughts (read below after watching)... Firstly, a big key to remember is that deals cost money to complete. Just in transaction fees, cost of living, and legal expenses, I believe I spent around $30,000 (as I mentioned in the video) to facilitate the closing of the Nebraska deal. Admittedly, much of that was paid out after the deal closed (or with the "profit") that came from the deal at the closing table (and from the cash flow of the business in our first ~2 months of operation).
The point is, it's worth noting that usually, it takes money to make money.
Moreover, the big point of this video was to dispel the myth that 100% seller financing is a common occurrence. Many of you - the viewers of my channel - talk about 100% seller finance like it falls off trees with ease.
In having discussed selling with dozens of owners now, and from talking to those with more experience than me, in the vast majority of deals, some money will exchange hands at the closing table. This is to pay the sellers broker, the seller him/herself, and to ensure the new buyer(s) have skin in the game.
That all said, yes - it is possible to structure a deal where you do not use your own personal funds (other than via the elusive 100% seller finance structure).
That's what we discuss above in the second half of the video. Structures that can work include:
-70/80% bank debt, and 20/30% seller finance (that's subordinated)
-70/80% bank debt, and 20/30% investor capital (with a preferred rate of return)
-70% bank debt, 20% seller finance (2nd position), and 10% investor capital (pref rate of return)
Each of these structures can work, and each of them function without the GP putting in his/her own funds.
At the end of the day, for any of this to work, persistence and volume will be needed. We are talking about *unconventional* business acquisition financing structures here. Remember that.
And know that it's worthwhile to have some funds saved up before you dive in head first (and get rid of your steady paying job) - because deals do take time to bring to life; and there are no guarantees!
-Jason
Ps- though it’s rare, indeed the most likely way to procure 100% seller financing is by finding an extremely distressed seller who needs to sell his/her business ASAP.
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