How much money do I really need to buy a business?

The price of a business is not the same as the cash you need at closing. A typical small-business deal uses a mix of bank financing (often an SBA loan), seller financing, and a buyer down payment. In most SBA-backed deals you only bring 10–15% of the purchase price in cash. You also need a separate cushion — usually 2–6 months of operating expenses — so the business does not run out of working capital after closing.

Maria buys a $500,000 landscaping business. She gets an SBA 7(a) loan for 80% ($400,000), the seller carries a note for 10% ($50,000), and Maria puts $50,000 down. She keeps another $25,000 in reserves. Her total out-of-pocket is $75,000 — not $500,000.

• ✓Lets ordinary people own a real, cash-flowing business
• ✓Leverages the business's own cash flow to repay debt
• ✓Down payment can sometimes include gifts, partners, or seller financing

• !Under-capitalization is the #1 cause of post-close failure
• !Debt service reduces take-home cash flow
• !Personal guarantees are typically required for SBA loans