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How to Finance a Business Without a Rich Uncle: 8 Strategies You Need to Know
Read time: 6 min
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There’s one question I get far beyond the rest.
“How do I get the money I need to buy a business?”
Businesses aren’t cheap. As in millions of dollars, not cheap.
So, how does someone with or without a college degree, fresh out of the military with modest savings come up with this kind of capital?
This article will go into the eight most common ways businesses are financed, with only one requiring a rich uncle.
*Note: this list is nowhere near exhaustive. There are dozens, if not hundreds of ways to raise capital, many are a blend of two or more options. This article is meant to show you that you’re not limited to the well-known SBA 7a loan.
I’m also not including Venture Capital because it gets way too much publicity for the <3% of businesses that meet their business model of 10x+ growth with a 5–10-year exit plan.
Bottom Line Up Front (BLUF)
Here are the eight topics we’ll cover
1. SBA 7a and 504 programs
2. Traditional banks
3. Grants
4. Partial buy-ins
5. Seller financing
6. Revenue-based financing
7. Angel investors
8. Friends & family investment
Let’s take a closer look at each of these.
1. SBA 7a and 504 programs
The SBA (Small Business Administration) offers two popular loan programs: the 7a and 504.
The 7a program is the most flexible, allowing borrowers to use the funds for a wide range of business purposes, including buying an existing business.
The 504 program is more specific, focusing on purchasing major fixed assets like real estate or large equipment.
Both programs are government-backed, meaning the SBA guarantees a portion of the loan, making it easier for small business owners to qualify even if they don’t have perfect credit. What’s most interesting is that you can buy a business using both programs.
Buy the land the business is on with a 504, and the business itself with a 7a.
However, the SBA requires a minimum of 10% equity injection (down payment) on the borrower’s part. Meaning if you want to max out the $5M loan, you need to have $500k to put down.
That can be a significant hurdle.
2. Traditional banks
Traditional banks offer business loans with fixed or variable interest rates and set repayment schedules.
These loans are typically more accessible to established businesses or buyers with strong credit histories and substantial collateral, but having a good relationship with a bank can open this option up for business acquisitions, too.
The bank will assess the risk of lending by evaluating the business’s financial health, the buyer’s creditworthiness, and the value of the collateral offered. While bank loans can be more challenging to obtain, they often come with lower interest rates compared to alternative financing options.
3. Grants
Business grants are a form of financial assistance that doesn’t need to be repaid, making them highly attractive to entrepreneurs.
They’re usually provided by government agencies, non-profit organizations, or private companies to support specific industries, causes, or demographic groups.
The application process for grants is often competitive, however, requiring a detailed proposal that demonstrates how the funds will be used to achieve the grantor’s objectives. Even finding grants you qualify for can be challenging.
While grants are a fantastic resource, they are not easy to secure and may come with specific requirements or conditions that the recipient must fulfill, such as reporting on progress or achieving certain milestones.
I classify grants as a nice-to-have, not what you should base your fundraising on.
4. Partial buy-ins
A partial buy-in involves purchasing a portion of an existing business rather than buying it outright.
This allows the buyer to become a co-owner and share in the profits and decision-making. It’s a strategic way to invest in a business without taking on the full financial burden or risk associated with full ownership.
You may also see this option when the owner wants to offer substantial equity to a key employee who will be staying on. This is extremely helpful for the buyer because now you’re retaining resident knowledge with an employee who has skin in the game.
You may also see these when an existing owner wants to retire gradually or when a business needs capital but doesn’t want to give up full control.
Additionally, this arrangement can provide the buyer with a learning opportunity before committing to complete ownership.
5. Seller financing
Anyone who’s heard of Codie Sanchez has heard of this option.
Seller financing occurs when the seller of a business agrees to finance a portion of the sale price, allowing the buyer to make payments over time rather than paying the full amount upfront.
This arrangement can be beneficial for both parties: the buyer can purchase the business with less capital, and the seller potentially receives a higher overall price due to the added risk. It also spreads their taxable earnings out over multiple years, saving them from a huge tax burden.
Terms are usually negotiable, including the interest rate and repayment schedule. Seller financing also keeps the seller invested in the long-term success of the business, as the loan repayment is contingent on the company’s financial health.
6. Revenue-based financing
Revenue-based financing (RBF) is a loan where the repayment is tied to the business’s future revenue.
Instead of fixed monthly payments, the borrower agrees to pay a percentage of their revenue until the loan is fully repaid, often with a cap on the total repayment amount. This makes RBF flexible, as payments increase during periods of high revenue and decrease when revenue is slower.
This is advantageous for both buyers and sellers because sellers can often recoup more than traditional owner financing and buyers can build in repayment without crippling overhead. The downside, however, is the cost of capital can be higher than traditional loans, and it may take longer to repay if revenue growth is slower than expected.
7. Angel investors
These are affluent individuals who provide capital to startups or small businesses in exchange for equity ownership or convertible debt.
Unlike venture capitalists, angel investors typically invest their own money and may be more willing to take risks on early-stage companies.
In addition to financial support, they often bring valuable expertise, industry connections, and mentorship to the businesses they invest in. However, accepting angel investment usually means giving up a portion of ownership and potentially some control over the business.
The terms of the investment are highly negotiable, depending on the perceived risk and potential for returns.
8. Friends & family investment
Raising funds from friends and family is a common way to finance a business, especially for first-time entrepreneurs.
This option involves borrowing money from people within your personal network, who may be more willing to invest based on their trust in you rather than the business itself.
While it can be easier and faster to secure funds this way, it also comes with significant risks, including the potential to strain personal relationships if the business struggles.
It’s important to formalize the agreement with clear terms and repayment plans to protect both parties and maintain healthy relationships.
In summary, no matter which route(s) you choose, remember this tips:
Diversify Your Funding Sources – don’t rely on just one type of financing. Consider combining different methods, such as seller financing with a partial buy-in, to reduce your upfront costs and financial risk.
Understand Your Options – be aware that each financing option has its own requirements and implications. For example, government-backed SBA loans require a significant down payment, while revenue-based financing ties your repayment to future earnings, offering flexibility but potentially at a higher cost.
Leverage Relationships – building strong relationships with banks, investors, and even sellers can open up more favorable terms and additional opportunities, such as lower interest rates or extended repayment schedules.
Be Prepared for Negotiation – many funding options, especially those involving private investors or seller financing, are negotiable. Be ready to discuss and tailor terms that work for both parties involved.
Formalize All Agreements – whether you're borrowing from friends and family or entering into a seller-financing deal, ensure that all agreements are formalized with clear terms to protect your interests and maintain good relationships.
Happy hunting, my friends!
This week's Harder Not Smarter Podcast episode:
Curious about what it takes to be both a Green Beret and a doctor? Dr. Jesse Greer shares his remarkable journey from flight surgeon to Special Forces, tackling everything from testosterone therapy and aging to the surprising links between sleep, hormones, and longevity. Dive into this episode to learn how lifestyle choices, nutrition, and holistic health strategies can change the game—especially for veterans. Don’t miss this insightful conversation packed with tips on living a longer, healthier life.
Listen here
Watch here
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