No money down?
Most of us want to own our companies. But starting a business is risky, so imagine buying one with no money down. There is freedom in deciding your own future. It is not easy though to start your own business from scratch. So, why not buy a business with a track record. What can be even better than not having to use your own money. Right?
I have seen many seminars being promoted that claim that they will teach you how to buy companies or even houses without your own money. They sometimes call these ‘No money down’ or ‘other people’s money’ schemes.
These schemes sound too good to be true and in reality, it takes a lot of hard work, a motivated seller and some serious negotiations for the schemes to succeed.
If you don’t believe me that this is a great business, then here is a link
Is it really true?
Here is a problem, the course to learn how to master the act of buying a business with no money down runs into thousands of dollars. It is a tough order finding people ready to sell their businesses unless they are in distress.
This can mean either the companies are in bad shapes or the owners are seriously struggling and are desperate to sell. But why would they want to sell a good business? Probably because the company is not doing well. If the owner of a business cannot make it work, how are you ( starting new likely to make the business work). Buying a business using this system can be tricky, you need to find the right business, in the right sector and a desperate owner. Of course you may be able to find such businesses if you have links to liquidators, solicitors and other professionals.
Let us assume that you manage to find the right business for you, in the right location with a motivated seller. Remember, there are a lot of ‘ifs’ everywhere. Also remember these ‘experts’ are teaching hundreds, if not thousands of people. You will all be competing for the same few ‘desperate sellers’.
Now the tricky bit, you will have to convince the seller to let you pay for the business over a few years using the money from the business. This is like buying a business on hire purchase. The owner finances the purchase over a period of time.
Here is the sucker punch
This may work, but why will the seller let you do this? Well, because you need to find a seller who is desperate enough to get rid of the business. In this very difficult times, that may be possible. Here is an example; a seller of a business is desperate to retire and wants to sell the business. You turn up on your horse 🐎 dressed as a knight. You offer to buy a £2m business for £2.2m. The owner is obviously over the moon, well until you tell him or her that you will be paying £220k per annum or just over £18k per month over the next 10 years. The money coming from the business.
You may be interested in another blog on whether to buy or start your own business
If you are a business owner will you accept this offer? Firstly, if there are no better offers and you are desperate to get away, then why not. What are the chances of success? I will say, you will need a lot of leg work to be successful using this method. On the other hand, you have nothing to lose. You need to keep trying if you want to get a business with no money down.
Will this work?
What is the risk to the buyer? In most of these contracts, the owner will get back the business if the buyer defaults. What will happen to the money already paid, well, likely to be lost.
Where did this idea originate from? My guess, this started during the time when the property market was at a slum. Many landlords were ready to get out of the business but they had negative equity and the properties were vacant. In that case, you can understand why a desperate landlord will want to offload such a property to someone else.
I had a gentleman who proposed to lease one of my properties with no money down. Unfortunately for the man, I believe he just attended the seminar and wanted to try his luck but he needed a distressed landlord, unfortunately that was not me. The whole thing sounded like a scam to me. Why would I ‘sell’ my property to you without money down and you will pay me less rent than I am getting for a ‘secured’ fixed amount lower than the market rate? I don’t expect anyone to fall for such a gimmick.
So if you are one of those interested in these seminars, please save yourself your money and not bother. These seminars work on so many ‘ifs and buts’. The chances of success are probably 1%, but those small successes are the ones that they sing and dance about. Just like a lottery winner becoming the poster person for the lottery companies. Of course a few people win sometimes, but what are the chances of the winner being you?
There are different variations of this, but rather than pay to attend the seminars, you may be able to try your luck as well, now that you know what the process entails.
Whatever happens, make sure you conduct a serious due diligence before you embark on buying or setting any business.
Please note this is not a financial advice as I am not an expert in this field.
Best of luck