# How to Buy a Business With No Money Down

Source: https://apply.grosfjeld-li.com/guides/how-to-buy-a-business-with-no-money-down · By Josh Li, G&L M&A Advisory · Updated 2026-10-14

**Short answer:** Buying a business with no money down means funding the whole purchase price without your own cash. The price is covered by a mix of commercial (senior) debt secured on the business, vendor finance (seller finance) repaid from the business’s cash flow, and seller rollover, where the owner keeps a minority stake. The acquired business’s own profit services every repayment.

**Key points:**
- No-money-down deals are funded by three parts: commercial (senior) debt, vendor finance (seller finance) and seller rollover.
- The business you buy pays for itself: its profit services the debt, ideally at a DSCR of around 1.5x.
- The three common structures are 60/40, 70/20/10 and 100% vendor finance.
- Sellers say yes when the structure gives them certainty, income and a successor they trust, not just the highest headline price.
- Owners of established $1M+ businesses are the most credible buyers, especially of competitors.

## What does "no money down" actually mean?

"No money down" means you don’t put your own savings, home equity or personal cash into the purchase price. It does **not** mean the deal is free or that nobody is paid. The seller still receives full value. It is paid from three other sources instead of your pocket:

- **Commercial debt (senior debt):** a loan from a lender, secured over the business being bought. "Senior" means it is repaid first if things go wrong.
- **Vendor finance (seller finance):** the seller lends you part of the price and is repaid over time from the business’s cash flow. See [seller finance explained](https://apply.grosfjeld-li.com/guides/seller-finance-explained).
- **Seller rollover:** the seller keeps a minority stake instead of taking that part of the price in cash. See [seller rollover explained](https://apply.grosfjeld-li.com/guides/seller-rollover-explained).

The key idea: the business you buy pays for itself. Its profit covers the loan repayments and the seller note, so neither your existing business nor your personal balance sheet carries the deal.

## Why would a seller agree to a no-money-down deal?

Because most owners of small and mid-sized businesses care about more than the cash at settlement. In our experience, the sellers who say yes want some combination of:

- **Certainty.** A buyer who already runs a similar business and can close.
- **Income.** A steady, predictable stream of payments after they leave, often more tax-efficient and more useful to a retiree than one lump sum. (Check with your own adviser.)
- **Legacy.** Their staff kept on, their customers looked after, and their name not dragged through a fire sale.
- **Upside.** A slice of what the business becomes under a stronger owner.

Many established businesses have no obvious successor. The children don’t want it, the staff can’t fund it, and private equity isn’t interested at that size. A credible operator who offers a fair price, structured sensibly, is often the best option the owner has.

Josh Li, founder of G&L M&A Advisory and JC Health Group, bought two of his own clinics with 100% vendor finance: no bank and no equity partner, with the owners paid over time from each clinic’s cash flow. Those sellers chose the right successor and a reliable income over a bigger cheque from a stranger.

## What are the main no-money-down deal structures?

We use three structures. Each one combines the same building blocks in a different ratio.

| Structure | Commercial debt | Seller finance | Seller rollover | Best for |
|---|---|---|---|---|
| [60/40](https://apply.grosfjeld-li.com/guides/60-40-deal-structure) | 60% | 0% | 40% | Sellers who want cash now and real upside later |
| [70/20/10](https://apply.grosfjeld-li.com/guides/70-20-10-deal-structure) | 70% | 20% | 10% | Retiring owners who want most of their money at settlement plus income |
| [100% vendor finance](https://apply.grosfjeld-li.com/guides/100-percent-vendor-finance) | 0% | 100% | 0% (optional) | Sellers who value the right successor over a lump sum |

### Illustrative example: one $1.5M business, three structures

*Illustrative only. Real deals depend on the business, the lender and the seller.*

| | 60/40 | 70/20/10 | 100% vendor finance |
|---|---|---|---|
| Lender funds | $900k | $1.05M | $0 |
| Seller note (paid over time) | $0 | $300k | $1.5M |
| Seller rollover (stake kept) | $600k (40%) | $150k (10%) | $0 |
| Buyer’s own cash | $0 | $0 | $0 |

In every column the buyer contributes no cash. What changes is who carries the risk and how the seller is paid.

## How do you choose the right structure?

Start with the seller, not the spreadsheet. The structure should answer the seller’s biggest worry, then pass the cash-flow test.

- **"I need cash now, but I believe in this business."** Lead with 60/40. The seller takes 60% at settlement and keeps a large stake in what comes next.
- **"I’m retiring and want to know what I’ll live on."** Lead with 70/20/10. Most of the money arrives at settlement, the seller note pays an income, and a small stake keeps them interested.
- **"I just want the right person to take over."** Consider 100% vendor finance. No bank, simpler paperwork, and the seller is paid from the business they built.

Then run the numbers. If the chosen structure can’t reach a DSCR of around 1.5x, change the ratios: more rollover means fewer fixed repayments, and a longer seller note means smaller ones. The three ratios are starting points, not rules. Most real deals end up as a variation on one of them.

## How does the business pay for itself?

Lenders and sensible buyers test every deal with the **debt service coverage ratio (DSCR)**. DSCR is the business’s cash profit available for repayments, divided by its total annual repayments (loan and seller note).

We structure deals at a DSCR of around **1.5x**. That means the business earns roughly $1.50 for every $1 it owes each year. The extra 50 cents is the buffer for a slow quarter, a lost client or a broken machine. Read more in [DSCR explained](https://apply.grosfjeld-li.com/guides/dscr-explained).

*Illustrative:* if the business makes $450k a year in cash profit, total annual repayments of about $300k gives a DSCR of 1.5x. If repayments would be $400k, the deal is too tight: lengthen the seller note, shift more into rollover, or lower the price.

## What does "over-financed" mean?

An over-financed deal raises more than the purchase price. The extra covers working capital (the cash a business needs to pay wages and suppliers before customers pay) and closing costs such as legal and due diligence fees. It often comes from a working-capital line the lender adds on top of the term loan.

This matters because "no money down" is pointless if you then have to fund payroll from your own business in month two. See [over-financed acquisitions](https://apply.grosfjeld-li.com/guides/over-financed-acquisition).

## Do I have to sign a personal guarantee?

Not always. In the 60/40 structure, the lender takes security over 100% of the business’s assets instead of asking for a personal guarantee. The seller’s large rollover stake also gives the lender comfort: the person who built the business is still invested in it. Whether a lender will agree depends on the deal and the lender. See [how to buy a business without a personal guarantee](https://apply.grosfjeld-li.com/guides/buy-a-business-without-a-personal-guarantee).

## Who can buy a business with no money down?

The most credible buyers already own and run an established business, typically doing **$1M+ in revenue**. Why?

- Sellers trust an operator who understands their industry.
- Lenders see a management team, systems and a track record.
- Buying a competitor creates savings and growth that a first-time buyer can’t offer: shared admin, combined purchasing, cross-selling to both customer bases.

That’s why the strongest targets are often competitors, or businesses next door to yours in the supply chain. See [buy your competitor](https://apply.grosfjeld-li.com/guides/buy-your-competitor).

## How do you buy a business with no money down, step by step?

1. **Set your target profile.** Industry, size, location and the gap it fills in your business. Aim for a business that can double or triple yours.
2. **Find off-market sellers.** The best deals are rarely listed. Contact owners directly, especially those near retirement. See [how to find off-market businesses for sale](https://apply.grosfjeld-li.com/guides/find-off-market-businesses-for-sale).
3. **Qualify the seller.** Learn their motivation before you talk price. Use these [questions to ask a business seller](https://apply.grosfjeld-li.com/guides/questions-to-ask-a-business-seller).
4. **Model the deal.** Work out cash profit, test it at a 1.5x DSCR, and choose the structure that fits the seller’s goals.
5. **Line up the financing.** Speak to lenders before you make an offer, so your offer is credible.
6. **Sign a letter of intent (LOI).** The LOI sets price, structure, timeline and exclusivity. See [the letter of intent explained](https://apply.grosfjeld-li.com/guides/letter-of-intent-buying-a-business).
7. **Run due diligence.** Verify the numbers, contracts, staff and risks. Know the [due diligence red flags](https://apply.grosfjeld-li.com/guides/due-diligence-red-flags).
8. **Close and integrate.** Settle, then follow a handover plan with the seller.

## What kills no-money-down deals?

From what we see, deals die for predictable reasons:

- **Leading with "no money down."** Sellers hear "I have no money." Lead with what they get: certainty, income, care for their staff.
- **Overpaying.** If the price can’t clear 1.5x DSCR, no structure saves it.
- **No financing lined up.** An offer that depends on a lender you haven’t spoken to is a wish.
- **Ignoring key-person risk.** If the customers are loyal to the seller, not the business, plan a handover period and keep the seller invested through rollover.
- **Weak buyer.** A first-time buyer with no operating history struggles to convince sellers or lenders.

## Is buying a business with no money down risky?

Yes. All acquisitions carry risk. You take on debt, obligations to the seller and responsibility for staff and customers. The protection is in the structure: a conservative DSCR, an over-financed deal with working capital, a seller who stays invested, and thorough due diligence. Get independent legal, tax and financial advice before you sign anything.

> This guide is general information, not financial, legal or tax advice.

## How G&L M&A Advisory helps

G&L M&A Advisory works with owners of established businesses to buy competitors and retiring owners’ businesses with no money down. The promise is a signed LOI within 90 days, on a deal over-financed at around 1.5x DSCR. It is done with you, not for you, and backed by a 7-day money-back guarantee.

If you own a $1M+ business and want to grow by acquisition, [see if you qualify](https://apply.grosfjeld-li.com/) for an acquisition strategy call.

## FAQ

### Can you really buy a business with no money down?

Yes. The price is funded by commercial debt, vendor finance (seller finance) and seller rollover instead of your cash, and the business’s own profit services the repayments. It works best for established operators buying profitable businesses.

### Where does the money come from in a no-money-down acquisition?

From three sources: a commercial (senior) lender secured on the business, a seller note repaid over time, and seller rollover, where the seller keeps a minority stake instead of cash.

### Why would a seller accept no money down?

Many owners value certainty, a reliable income after they leave, and a successor who will look after their staff and customers. A well-structured offer from a credible operator can beat a higher price from an unknown buyer.

### What size business can I buy with no money down?

Size depends on the target’s cash profit, not your savings. The deal must service its repayments, so we test it at a DSCR of around 1.5x before making an offer.

### Do I need a personal guarantee to buy a business with no money down?

Not always. In a 60/40 structure, the lender can take security over 100% of the business’s assets instead of a personal guarantee, though each lender decides case by case.

### Is a no-money-down business purchase a good idea?

It can be, if the business has stable cash profit, the price clears a sensible DSCR and due diligence checks out. It is a poor idea if the numbers only work in a perfect year.

### How long does it take to buy a business with no money down?

G&L M&A Advisory’s programme targets a signed letter of intent within 90 days. Due diligence and settlement follow, and their timing depends on the deal and the lender.