If the business you're buying is making money, you may be able to obtain a bank loan to finance the deal. However, if the seller is willing to provide financing, this may be an even better option. Seller-side financing (often referred to as an "earn-out") allows the buyer to make a small downpayment--say, 10 percent of the purchase price--then pay out the rest over time.
Often, earn-outs are tied to the company's future financial performance, giving the former owner an incentive to teach you the business and retain loyal customers.
Rosalind Resnick is the founder and CEO of
Axxess Business Consulting, a New York consulting firm that advises startups and small businesses.
