No Money Down Deals

professional profile

August 23, 2024

by a professional from University of Michigan - Ann Arbor in Detroit, MI, USA

I've met with a number of self-funded searchers recently who are looking for no money down deals--deals in which the entire purchase price is covered by a combination of SBA debt and seller financing.

This deal structure is often promoted by social media influencers who (conveniently) also sell courses on how to pull it off.

Everyone I know and trust in the lending space tells me a no money down deal is a no go in the current economic climate--searchers have to bring at least 5% to the table, whether from personal funds or investors.

But I thought I'd ask the community. Who's pursuing a no money down deal? Any luck? What's been your experience?

I would also love to hear from lenders. Please share your thoughts!

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Reply by a lender
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA
^redacted‌ thank you for the tag. The updated SBA Standard Operating Procedure from last year technically allows transactions to get done with $0 down if the seller carries back a note for 10% or more of the purchase price on full standby (meaning no payments) for at least two years and allows the buyer to get away with as little as 2.5% down if there is a seller note for 10% or more of the purchase price that is interest only for two years. Although that is the rule, the reality is I am not seeing lenders offer this. Most lenders want to see some sort of minimum equity contribution from the Borrower. We have had success getting some deals done at 2.5% and have done many deals at 5%, but few at $0 down. The only deals I see getting done at $0 down are as follows:
1) Employee(s) buying out the owner of the business. Since there is minimal to no transition risk, lenders have been comfortable doing these deals with no equity down.
2) Very experienced industry professional and business operator within the specific industry they are buying a business in. We have seen one deal get done with $0 down.
3) A business owner buying another business in the same industry they are in or even a related industry. You can do $0 down on a business expansion loan and we have even seen some lenders offer it for other businesses with the seller note in place so long as they can flex the other business for support on the loan.

Outside of these circumstances I do not see 100% financing getting done. We have over 80 SBA funding partners we work with, and none of them are doing $0 down as a general rule. I would recommend caution against anyone marketing that they can do it. I have had numerous customers that have worked with other lenders (not with us) been bait and switched where they have been told they could do $0 down but then in the approval process the lender comes back and requires money down.

Lastly, please be aware if you are doing a partial business acquisition you cannot use a seller note as part of your required down payment. There is another rule on partial business acquisitions where you can layer the debt into the historical balance sheet and if the debt to net worth ratio with the business acquisition debt layered in is 9 to 1 or less, you can get away with $0 equity. However, even if this case, with rare exceptions, are we seeing lenders do deals with $0 down. Also, many people who do not have money to put down also do not have much of a net worth. Most lenders want to see buyer have some fall back net worth and liquidity as well. I hope this helps.. I am always willing to talk with anyone who has questions about this. You can reach me at redacted
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Reply by a searcher
in Fort Worth, TX, USA
On the SBA front I was facilitating an acquisition for a past employer and I secured a 100% no money down term sheet from top SBA bank maybe 3 years ago. If I remember correctly a business being the borrower allowed for a no money down with that particular bank.

I've completed 2 "no money down" deals.

First one was a turnaround of a $500k revenue bike shop that was 3 months away from closing down. Technically we voluntarily paid the seller $10 with the balance being conditional payments. We stabilized it and sold it last year for a 14,000% ROI. I probably wouldn't do a turnaround that small again.

2nd deal was just under 8 figure profitable Saas company. We raised 100% of the capital needed to close in debt and equity and put nothing down.

LBOs and Sale lease backs are done all the time with no money down just need proper assets in the target business.

Definitely possible it just requires the proper knowledge of how to do it and the determination to get it done. SBA has its place and is a great tool, but there's a whole world outside of SBA for those who want to do bigger and multiple deals without PGs or needing to put cash down.
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