Down Payment Norms
Down Payment Norms
How much money does a buyer need to buy a small business? There is no single answer, but there are norms.
The minimum cash needed today is about $100,000. To buy a business that makes at least one living wage for an owner/operator, this is the figure we use. Some is for the down payment. Some is for working capital.
A common ‘rule of thumb’ is 1/3 from the buyer, 1/3 from the seller and 1/3 from a lender. If a business grosses $500,000 and has cash flow of 10% ($50,000) to an owner, it might sell for $150,000 plus inventory. If the down payment is $50,000 (or 1/3), there might still be another $50,000 required for the purchase of inventory and for working capital, totaling $100,000.
Our typical listing is $750,000 and requires $250,000 down, plus inventory purchase and working capital, so you can see the numbers get bigger very quickly. Larger transactions don’t fit any mold at all. Many are ‘all cash.’ Some involve little cash and the exchange of marketable securities.
See also Financing A Business.
Featured Businesses
-
Southern Maine Specialty Commercial Construction Business
Acquire a well-established specialty construction services business with a defensible market niche, experienced workforce, strong demand drivers, and significant opportunities for continued growth.
Headlines
-
2025 and Business Brokerage in Maine & New Hampshire
Happy New Year. Much has changed in the last few years with the business brokerage market, giving Buyers and Sellers more resources, channels to connect and choices to utilize.