Liquidity Woes: How Do I Compete?

June 02, 2024

by a searcher from University of Colorado at Boulder in Parker, CO, USA

Hey everyone,

I've been diving deep into the world of small business acquisitions for the last year, and I'm hitting a big roadblock: cash. I've got loads of experience and am more than ready to buy, but my liquidity is holding me back. I've set aside under $200k for the downpayment and all the other costs (legal, due diligence, etc.), but I’ve got nothing left for working capital after the purchase.

Plus, my search is limited to within 100 miles of a particular city, making finding the right business even more challenging. Every time I make an offer, it gets beat out by buyers who seem to have endless funds and are eager to snap up any business, good or bad. It's frustrating!

So, what can I do to stay in the game? Are there financing options, partnerships, or strategies I should consider? And at what point do I call it quits and realize it might not be the right time? Should I be saving more and trying again in a few years?

I’d love to hear your advice and any tips you’ve got from your own experiences.

Thanks a ton!

Reply by a lender
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA

I understand you are confined to the geography you are looking in, and it can be a challenge when you have limited flexibility to put more money down and compete. However, we do see plenty of clients in your position eventually find the right business. I think the key is not over-stretching on the size of business you are looking to buy. With $200,000 down, you could buy up to a $2 million business with 10% down and possibly a $4 million business with 5% down using the SBA 7A loan program, but just because you "could do that" does not mean it is the right thing for your financial position. You need to be realistic in the size of the business you are looking to buy based on your overall net worth and try to leave some post closing liquidity. But there should be plenty of deals to be found in the $1 million to $2 million range. You should also see less competition in this range, at least from large PE firms, as they tend to look at larger deals.

We would be happy to look at your situation, get you pre-approved, and see how we can assist you in getting a deal together. You can reach me here or directly at redacted Good luck.

Reply by a searcher
from Texas A&M University in Surprise, AZ, USA

I feel your pain. A simple solution assuming you don’t already have a deal lined up is to pick a smaller deal that wouldn’t be an overreach for you. Alternatively, you either have to get creative with the deal terms, take on additional debt, or bring in a partner(s). As ^redacted‌ stated, you dilute yourself but it may make your deal more manageable with additional resources.

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