When people talk about buying a small business, the advice usually sounds simple:
get a bank loan, have strong financials, and everything works out.
That wasn’t my experience.
I bought a business without a traditional bank loan, and the process was far from straightforward. This post shares what really happened, what worked, and what I learned along the way.
I share more about the risks of borrowing in Is Taking a Loan to Start a Small Business a Mistake?
How I Found the Business
The business I bought was listed through a private sale online.
There was no broker office, no polished presentation, and no guarantee that financing would be easy. It was a real opportunity, but also a real risk.
At the time, traditional lenders were not willing to move quickly, and I didn’t yet have operating history under my ownership.
The Deal Structure That Made It Possible
Instead of a traditional loan, the deal was structured through a private agreement.
Part of the purchase price was paid upfront. The rest was agreed to be paid monthly over time, without interest. This made the purchase possible when bank financing was not available.
While this helped move the deal forward, it also created long-term obligations that needed to be planned for carefully.
Why Traditional Financing Didn’t Work at First
Banks and traditional lenders usually want:
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Business history under current ownership
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Clean financial records
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Predictable cash flow
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Time for review and approval
Buying an existing business doesn’t automatically solve these issues. Without history under my ownership, approval was difficult.
Waiting months for financing was not realistic for this situation.
Investing Beyond the Purchase Price
Buying the business was only the beginning.
After the purchase, additional money was invested to improve operations and prepare the business for long-term growth. These investments were necessary, but they added pressure early on.
This is something many buyers underestimate — the purchase price is rarely the final cost.
The Risks That Come With Private Deals
Private financing and seller agreements can be helpful, but they come with risks:
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Monthly payments don’t pause when business slows
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Personal finances are often tied to the deal
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There is less flexibility if problems arise
These risks don’t mean private deals are bad, but they do require clear planning and realistic expectations.
How This Changed How I Think About Financing
Going through this process changed how I view financing decisions.
It reinforced that:
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Speed often matters more than ideal terms
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Financing choices affect daily stress, not just numbers
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Cash flow matters more than projections
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Every deal has trade-offs
Understanding those trade-offs early makes a difference.
Financing decisions like this directly affect cash flow, which I explain in this post about bookkeeping and cash flow.
Final Thoughts
Buying a small business without a traditional bank loan is possible, but it’s not easy.
Private deals can open doors when banks say no, but they also shift risk onto the buyer. The key lesson is not whether this approach is right or wrong — it’s understanding what you’re committing to before moving forward.
Disclaimer
This article is based on personal experience and is for educational purposes only. It is not financial advice.
