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
-
Recurring Revenue Home Services Provider
Profitable, growing business with a well-established brand and operations. Sizable number of recurring customers and significant opportunities for growth.
-
Mid-coast Restaurant, Commissary and Catering
Prime downtown location, loyal year-round clientele, plus seasonal tourism. Unique space balances comfort with refined charm.
