According to the U.S. Census Annual Survey of Entrepreneurs, about 21% of business owners become owners by purchasing an existing business. To finance a purchase of an existing business, entrepreneurs use a combination of debt from banks and equity from investors. Buyers typically borrow two-thirds of the purchase price: About 20-25% of the business value from seller financing, 30-50% from bank loans, and about 30-35% of the business value from equity investments.1 Equity investments can be appealing because there's usually no obligation to pay back the money if the business fails (which is part of the risk for an investor), but when the business makes money, the original owner has to share a percentage of the ownership and profits. Comparatively, bank loans need to be paid back even if the business fails. However, if the business succeeds, once the loan is paid off, all of the profit goes to the owner.
The following external websites provide links to resources on buying a business or franchise.
The following materials link to fuller bibliographic information in the Library of Congress Online Catalog. Links to additional online content are provided when available.