Because the target business has a credit history, existing assets, an established operating cycle and business goodwill, lenders and investors can be approached in the same manner as if you were seeking to expand a business you already owned. The major distinction between financing for the purchase of an existing business and financing to raise funds for your own growing business is that the former offers the opportunity for seller-financing . Entrepreneurs who are selling their small businesses usually realize that they may need to participate in the buyer's financing of the business sale, and they may be willing to negotiate a very favorable debt or equity arrangement with you. The existing assets of the business are often the exclusive collateral for the financing. In contrast to the common practice of conventional lenders, additional or personal assets of the buyer are rarely pledged as additional collateral on a seller-financed loan.
Personal guarantees are less likely.
The seller may be amenable to taking a subordinate interest to allow you to obtain conventional financing. The incentive for the seller is that the more money you can obtain from other sources, the more money the seller gets upfront. A conventional lender will require a priority claim on business assets and so the only way you may be able to qualify for the loan is to subordinate other creditor claims. The buyer's assumption of the existing debts or liabilities of the business may be a means of reducing the purchase price. Typically, much of the downpayment or initial cash price of a business sale goes toward a reduction of existing business debt.