Should I buy a business with debt or buyout owner through growth?

October 31, 2025

by a searcher from Harvard University in Sammamish, WA, USA

What makes more sense for self-funded searchers who are pursuing deals beyond their personal balance sheet? 1) Acquire a business with debt and terminate management, stepping into daily operations roles yourself in order to maximize earnings, or 2) No debt, and buy out Owner over time through expansion of operations. Existing management remains in place to run daily operations and you focus on growth. But you eat what you kill and no personal income unless you grow the business.

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Reply by a lender
from Cornell University in Los Angeles, CA, USA

Hi ^redacted‌, nice to meet you. Using SBA financing is usually a better path than trying to buy out an owner slowly through growth. The “no-debt, buyout-over-time” approach often sounds appealing but comes with real limitations. Control and alignment: Without a defined buyout or ownership structure, you’re essentially building someone else’s company. You invest time and effort but don’t have real control until much later, and your growth directly benefits the seller first. Financing efficiency: SBA loans let you acquire full ownership upfront with about 10% down (or 5% down depending on structure) and predictable terms, using the business’s cash flow to repay the loan. It’s far more efficient than funding growth out of post-tax profits. Even though SBA rules limit the seller’s involvement to 12 months, they can still consult independently afterward. That keeps valuable management insight in place without compromising compliance. We have a lot experience financing various types of companies via the SBA. If you ever need help talking through a deal, I am happy to help. We work with all the major SBA lenders. The bank pays us after your loan closes, so this is a 100% free service for you. You can email me directly at redacted or schedule a meeting with me: https://cal.com/francodeguzman/30min. Look forward to chatting!

Reply by a searcher
from University of San Francisco in Vancouver, WA, USA

There are certainly a lot more options than this. Are these the only two you have identified or aligned with seller on for a specific opportunity? Some others I can think of for pursuing deals beyond your balance sheet: 1. Bring in other minority investors to fill equity portion 2. Seller finance upfront w/ earnout for owner if business grows 3. Work in the business to get to know it for x months then negotiate more confidently (terms/seller finance) with that info (if you are willing/able to) 4. If real-estate involved negotiate sale and then do sale lease back to get equity to buy business The no debt and buying out over time is attractive on the surface but seems to leave you pretty exposed (in not actually getting anything) with little certainty (like option 3). Could be great if you trust the owner a lot or have the time to burn. In that situation, I would think you would want an agreement clearly in writing up front clarifying the terms (including price and even call option > basically if you help grow the business quickly and it becomes worth a lot more you have locked in a price and very likely could get money from investors based on the delta between what you negotiated and what it is worth post growth)

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