DEBT FINANCING

Savings, Friends, Family, and Credit Cards
You should initially investigate the possibility of raising funds through your savings, friends, family or credit cards. If you fail to raise the funds through these people, you can structure the deal through a combination of debt and/or equity financing.

This method of financing is an advantageous way to finance a business startup or acquisition because you will have complete control over the decisions of the business. This is probably the most common form of financing for a portion of a small business acquisition. The buyer will usually come down with a portion of the down payment with capital from this source. However, you must use caution if you obtain loans from family or friends. Oftentimes, these loans may cause permanent damage to personal relationships.

A number of successful business people (e.g. John Singleton, a movie producer in Hollywood) have utilized credit cards to finance a portion of their ventures. However, the problem with credit cards are twofold: (1) They are limited in the amount of money you can obtain and (2) Interest rates on long-term cash advances are extremely high. However, short-term rates (e.g. less than a year) are lower.

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