The best way to finance the purchase of a business is probably with investors.
Not the banks.
And certainly not loans from other non-bank organizations.
However, I recently heard something that made me think twice about which type of investor funding is best.
You see, while real investor funding means you don’t have to pay interest (after all, they’re investing money, not lending), not all investors are made the same.
In this case, I learned a dirty little trick that many of the most “unscrupulous” venture capitalists will play on people. And it’s kind of “chaining you” when you ask for money.
In other words, they will keep saying you will get the money you need next month or next week or whenever.
But in reality, they don’t intend to give you anything until the last possible minute.
Because, as any scam artist knows, when it comes to giving someone money, the longer they wait to give it to you…the more desperate you will be.
And the more desperate you are, the more they can ask you in return.
In the case of venture capitalists, it will usually be about getting more shares (and therefore, control of your business) for their money.
It’s a terrible thing for them to do. But many venture capitalists do this, so you have to be careful if you use one.
But really, that shouldn’t be a problem for 99% of people buying a business.
Because if you’re buying a small business, venture capitalists usually won’t care about you anyway (this is where “angel investors” come in).
And if you buy a larger business (worth, say, $5, 10, 15 million or more), there are plenty of private investors – with more money than they can spend – who will give you the funding you need if what you are doing makes sense to them.
Either way, keep this article in mind when thinking about financing a business you want to buy, especially if you don’t want to rely on a bank or other creditor.