What Should Be in Your Partnership Agreement
Partnership agreements are essential business documents, the importance of which is difficult to overstate. No matter whether your business partner is essentially a stranger or a lifelong friend, it is prudent to have a written partnership agreement.
A good partnership agreement clearly outlines all rights and responsibilities and serves as an essential tool for dealing with fights, disagreements and unforeseen problems. With the right documentation, you can identify and eliminate a wide range of potential headaches and problems before your business even starts.
Determining the Share of Profits, Regular Draw, Contributing Cash and More
Partnership agreements will also outline the share of profits that each partner takes. Other important issues that a partnership agreement should address is determining whether or not each partner gets a regular draw. Invest considerable time to the part of the partnership agreement that outlines how money is to be distributed, as this is an area where a lot of conflict occurs.
The issue of who is contributing cash and services in order to get the business operational should also be addressed in the partnership agreement. Likewise, the percentage that each partner receives should be clearly indicated.
Partnership Agreements Outline and Prevent Potential Problem Areas
Another area of frequent problems is in the realm of who makes business decisions. Here are just a few of the types of questions that must be answered:
- Are business decisions made by a unanimous vote or a majority vote?
- What must take place in order to consider new partners?
- Who will be handling managerial work?
- How will the business continue and what changes will occur in the event of a death?
- At what stage would you have to go to court if a conflict cannot be resolved within the framework of your partnership agreement?
You might just want to get your business running as soon as possible, but not addressing these issues in the beginning could spell disaster down the road.
The Uniform Partnership Act
One option to consider, which is offered in all states except Louisiana, is the Uniform Partnership Act or UPA. The UPA covers all the legal regulations that specifically apply to partnerships.
Reduce Conflict Via a Partnership Agreement
Forming a partnership can be great way to launch a new business, but it is also important to keep in mind that no matter how exciting the process may be it is still a business. New businesses face an array of challenges, and the last thing any new business needs is internal disruption. Mapping out via a partnership agreement the duties and expectations of all partners is an easy and logical way to reduce internal conflict within the business so that you can stay focused on building the business and making money!
Copyright: Business Brokerage Press, Inc.
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Can I Buy a Business With No Collateral?
By Troy Frank, Owner — Indiana Equity Brokers
Estimated read time: 7 min
The short answer: Yes, it is possible to buy a business with little or no collateral of your own. The two main paths are SBA 7(a) loans, which require as little as 10% down for a business acquisition (and that 10% doesn’t have to be entirely your own cash), and seller financing, where the current owner carries part of the purchase price. Many Indiana acquisitions combine both. The key qualifiers aren’t collateral; they’re your credit score, your relevant experience, and the cash flow of the business you’re buying.
Most people assume buying a business works like buying a house: you need a big down payment, solid assets to pledge, and a bank that trusts you completely. That assumption stops a lot of would-be buyers before they even start looking.
The reality is more flexible than that. The SBA 7(a) loan program was designed specifically to bridge the gap between what buyers have and what lenders typically require. And seller financing — where the seller carries part of the note — is more common than most buyers realize. Understanding how these two tools work, and how to combine them, is what separates buyers who close deals from buyers who stay on the sidelines.
SBA 7(a) Loans: The Most Common Path for Business Buyers
The SBA 7(a) loan is the workhorse of small business acquisitions. For most Indiana buyers, it’s the first tool worth understanding.
Here’s how it works for acquisitions: the SBA guarantees a portion of the loan to the lender — 85% for loans up to $150,000 and 75% for loans above that. That guarantee reduces the lender’s risk enough to make loans that would otherwise be too thin to approve.
How Much Do You Actually Need to Put Down?
The minimum equity injection for an SBA business acquisition loan is 10% of the purchase price. That’s a significant improvement over what most buyers expect. And here’s the part most articles miss: that 10% doesn’t have to be entirely your own money.
The SBA permits a seller note on full standby to count toward up to half of the required injection. In practice, that means a buyer can close with as little as 5% of their own cash, paired with a 5% seller note that goes on standby (meaning the seller can’t be repaid until the SBA loan is fully paid off or a certain time period passes).
For a $500,000 acquisition, that’s $25,000 out of the buyer’s own pocket. Not nothing — but far less than most buyers think they need.
What About Collateral Specifically?
The SBA’s current guidelines (updated under SOP 50 10 8) have loosened collateral requirements compared to prior years:
- Loans up to $50,000: No collateral required by SBA policy
- Loans from $50,000 to $500,000: The acquired business’s assets serve as collateral. Personal real estate is generally not required at this tier.
- Loans over $500,000: The business assets are still primary collateral. Personal real estate may be pledged if business assets fall short, but lenders can’t require it if the deal otherwise qualifies.
The practical takeaway: for most Main Street acquisitions in Indiana (deals in the $200,000–$750,000 range) buyers without personal real estate can still qualify if the business’s own assets and cash flow support the loan.
What Lenders Actually Look For
Lenders underwriting an SBA acquisition loan are evaluating three things:
Your credit score. A 680+ FICO is the general minimum. Scores below that significantly limit your options, regardless of the deal quality.
Your relevant experience. Lenders and the SBA want to see at least 2 years of management or direct industry experience. You don’t need to have owned a business before, but you need to demonstrate you can run one.
The business’s cash flow. This is the biggest factor. The business must show a debt service coverage ratio (DSCR) of at least 1.25x after the acquisition debt is added. In plain terms: the business needs to generate at least $1.25 in cash for every $1.00 it will owe in loan payments. A strong, well-documented business makes lender approval significantly easier.
We’ve walked many Indiana buyers through this process. The deals that move quickly are the ones where the buyer’s qualifications and the business’s financials both tell a clean story.
Seller Financing: The Option Most Buyers Don’t Ask About
A lot of buyers never ask sellers about financing. They assume the answer is no. That assumption is wrong more often than you’d think.
Seller financing means the seller agrees to receive part of the purchase price over time, rather than all at closing. The buyer pays the seller directly, typically at a negotiated interest rate over 3–7 years. The seller essentially becomes the bank for a portion of the deal.
Why would a seller agree to this? Several reasons:
- It expands the buyer pool. Cash-only or heavily qualified deals limit who can buy.
- It signals confidence. A seller willing to carry a note is telling the buyer they believe in the business’s future cash flow.
- There can be tax advantages for the seller in spreading income over multiple years.
- In competitive markets, offering seller financing can be the difference between a deal that closes and one that falls apart.
In our experience at Indiana Equity Brokers, seller financing is a feature of a meaningful share of Main Street transactions (particularly for businesses in the $200,000–$1 million range). Buyers who come to the table understanding how to structure a seller note tend to close more deals.
The SBA + Seller Financing Stack
Combining an SBA 7(a) loan with seller financing is the most powerful low-collateral structure available to business buyers. Here’s a simplified example of how the stack might look on a $600,000 acquisition:
- SBA 7(a) loan: $510,000 (85% of purchase)
- Seller note on standby: $30,000 (5% — counts toward equity injection)
- Buyer cash injection: $30,000 (5% — from buyer’s own funds, savings, gift, or investor)
- Seller note (active): $30,000 (additional seller carry, separate from the standby note)
This structure isn’t hypothetical — it’s the kind of deal structure that closes regularly. The buyer brings $30,000 of their own money to acquire a $600,000 business. The key is that all layers have to be disclosed to and approved by the SBA lender. Hidden seller notes are a fast track to loan denial.
One important detail: SBA rules require seller notes used as equity injections to be on full standby during the SBA loan term. The seller can’t receive repayment until conditions are met. Most sellers who agree to carry a note understand this, but it needs to be clearly negotiated upfront.
For a deeper look at how SBA loans work for Indiana buyers, our complete guide to SBA loans for business acquisition walks through the full process.
What Actually Stops Most Buyers (It’s Not Collateral)
After working with buyers across Indiana for more than 23 years, the collateral question is rarely what actually blocks a deal. Here’s what does:
Poor credit. A 580 credit score won’t get an SBA loan approved regardless of the deal quality. If your credit needs work, start there. 6–12 months of focused improvement can open doors that are currently closed.
No relevant experience. Lenders and sellers both want buyers who can actually run the business. If you’re buying a manufacturing company but your background is in retail, expect harder questions. The fix is to find a business in a sector where you have transferable skills, or to bring on a partner or key employee who fills the experience gap.
An undocumented business. The SBA lender will order their own appraisal and review the business’s financials independently. If the seller’s books don’t support the purchase price or if the cash flow doesn’t cover the debt service, no amount of buyer qualification fixes it. The business has to pencil out.
Overestimating what “no collateral” means. Buying a business with no collateral doesn’t mean buying a business with no skin in the game. You’ll still need cash for the equity injection, closing costs, and working capital reserves. Budget for total out-of-pocket costs of 12–15% of the purchase price even in a well-structured low-down-payment deal.
Frequently Asked Questions
Can you really buy a business with no money down in Indiana? True zero-money-down acquisitions are rare and typically limited to seller-financed deals where the seller agrees to carry 100% of the purchase price, which is uncommon. Most low-collateral acquisitions require a minimum of 5–10% of the buyer’s own cash. SBA 7(a) loans require a 10% equity injection, which can include a seller note on standby, reducing the buyer’s personal cash contribution to as little as 5%.
What credit score do you need to buy a business with an SBA loan? Most SBA lenders require a minimum FICO score of 680 for a business acquisition loan. Scores below that may still qualify with certain lenders, but the pool narrows significantly and terms are less favorable. Before searching for a business to buy, it’s worth knowing your credit score and addressing any issues.
How does seller financing work when buying a business? Seller financing means the seller agrees to receive part of the purchase price in installments after closing, rather than all at once. The buyer pays the seller directly over a set term, typically 3–7 years, at a negotiated interest rate. Seller notes can be structured alongside SBA loans, though the SBA requires disclosure of all notes and may require the seller note to be on standby during the SBA loan term.
What does the SBA mean by “equity injection”? The equity injection is the buyer’s contribution to the deal and it is the portion of the purchase price not funded by the SBA loan. For business acquisitions, the SBA typically requires 10% equity injection. This can come from the buyer’s personal savings, a gift from a family member, funds from investors, or a seller note placed on full standby. The source must be documented and disclosed to the lender.
What businesses in Indiana can be bought with SBA financing? Most for-sale businesses in Indiana are eligible for SBA 7(a) financing as long as the business meets SBA eligibility requirements: it must be a for-profit U.S. business, the buyer must have relevant experience, and the business must demonstrate sufficient cash flow to service the debt. Some business types (certain financial businesses, passive income real estate, and a few others) are excluded. An SBA-preferred lender can quickly tell you whether a specific business qualifies.
Ready to Start Looking?
Buying a business in Indiana without a mountain of collateral is genuinely possible. The buyers who succeed aren’t necessarily the ones with the most money. They’re the ones who understand the financing structures available to them and come to the table prepared.
Indiana Equity Brokers works with buyers at every stage of this process. Whether you’re still figuring out what you can afford or you’re ready to make an offer, we can connect you with Indiana businesses currently for sale and walk you through how the financing typically comes together on deals like the ones you’re considering.
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Should You Become a Business Owner?
While being a business owner may in the end not be for everyone, there is no denying the great rewards that come to business owners. So should you buy a business of your own? Let’s take a moment and outline the diverse benefits of owning a business and help you decide whether or not this path is right for you.
Do You Want More Control?
A key reason that so many business savvy people opt for owning a business is that it offers a high level of control. In particular, business owners are in control of their own destiny. If you have ever wished that you had more control over your life and decisions, then owning a business or franchise may be for you.
Owning a business allows you to chart your own course. You can hire employees to reduce your workload once the business is successful and, in the process, free up time to spend doing whatever you like. This is something that you can never hope to achieve working for someone else; after all, you can’t outsource a job.
Keep in mind that when you own a business or franchise, you never have to worry about being downsized or having your job outsourced. You also don’t have to worry about asking for a raise. No doubt business owners do have to contend with market forces and unexpected turns. But even considering those factors, business owners clearly enjoy a greater level of control over their destiny.
Are You Willing to Forgo Benefits?
As an employee, you’ll usually be able to count on a regular income and even allowances for sick days and vacation days. However, business owners lose money if they are sick or take a vacation. Plus, they won’t necessary have the steady salary that employees receive as they could see their income vary from one month to the next.
Do You Want to Grow Your Income?
Business owners have the potential to grow their income and take a range of proactive steps that lead to income growth. As an employee, your fate is far different. Employees usually exercise either minimal or no control over the course of a business and have no say in key decisions that impact its growth and stability. Being a business owner by contrast allows you to seize that control.
The amount of income made by business owners varies widely depending on everything from the industry to the region. But statistics show that the longer you own your business the more you’ll make. In fact, those who have owned their businesses for greater than 10 years tend to earn upwards of 6 figures per year.
One of the best ways to determine whether or not being a business owner is right for you is to work with a business broker. A broker understands everything that goes into owning a business and can help you determine whether or not you have the mindset to set out on the path towards business ownership.
Copyright: Business Brokerage Press, Inc.
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Three Overlooked Areas to Investigate Before Buying
Before you jump in and buy any business, you’ll want to do your due diligence. Buying a business is no time to make assumptions or simply wing it. The only prudent course is to carefully investigate any business before buying, as the consequences of not doing so can in fact be rather dire. Let’s take a quick look at the three top overlooked areas to investigate before signing on the dotted line and buying a business.
1. Retirement Plans
Many buyers forget all about retirement plans when investigating a business prior to purchase. However, a failure to examine what regulations have been put into place could spell out disaster. For this reason, you’ll want to make certain that the business’s qualified and non-qualified retirement plans are up to date with the Department of Labor. There can be many surprises when you buy a business, but this is one you want to avoid.
2. 1099’s and W-2’s
Just as many prospective buyers fail to investigate the retirement plan of a business, the same is often true concerning 1099’s and W-2’s. In short, you’ll want to be sure that if 1099’s have been given out instead of W-2’s that it has been always done within existing IRS parameters. There is no reason to buy a business only to discover a headache with the IRS.
And speaking of employees, does the business you are interested in buying have employee handbooks? If so, you’ll want to make sure you review it carefully.
3. All Legal Documents
The simple fact is that you never want the business you are interested in buying to have its corporate veil pierced once you take over. You should carefully review all trademarks, copyrights and other areas of intellectual property to be sure that everything is completely in order. You’ll want to obtain copies of all consulting agreements, documents involving inventions as well as intellectual property assignments.
Everything should be protected and on legally sound footing. If you see any problems in this category you should run for the hills and find another business to buy.
Protect Yourself from a Potential Lifetime of Regret
Evaluating overlooked areas is essential in protecting your investment. For most people, the purchase of a business is the largest of his or her lifetime. It leaves little room for error.
Not only is it vital to investigate the major areas, but it is also essential to explore the smaller details. However, the truth of the matter is that when you’re buying a business there are no “small details.” No one realizes this fact more so than business brokers. Business brokers are experts in what it takes to buy and sell businesses. Working with a business broker is a significant move in the right direction. The time you invest in properly exploring and evaluating a business is time well spent and may literally save you from a lifetime of regret.
Copyright: Business Brokerage Press, Inc.
Langstrup Photography/BigStock.com
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5 Tips for Buyers of International Businesses
The decision to buy an international business is no doubt quite serious. There are numerous factors that must be taken into consideration when deciding whether or not an international business purchase is the right move. Let’s take a closer look.
Tip #1 – Relocating Vs. Hiring a Manager
Buying an international business can also mean a substantial life change. Before jumping into the process, it is critical that you know whether you will be relocating or hiring a manager to run your newly acquired business.
Obviously, owning a business is a substantial responsibility and you’ll want to ensure that you know exactly what is going on with your new acquisition. Sometimes that means actually being there. The bottom line is that you will either have to relocate or hire a manager.
Tip #2 – Regulations
Understanding regulations, taxes and customs are another must for buyers of international businesses. A failure to factor in these elements can literally undo one’s business or at the very least place you at a competitive disadvantage. The time and money you invest in learning how regulations, taxes and customs work in this new territory is time and money well spent.
Tip #3 – Research Similar Businesses
You will want to invest your time into research. In particular, you will want to research similar businesses that already exist in the place where you are investing. Why are those businesses successful? What could you do to improve on their model or approach? Don’t assume that just because you know how businesses fare in the United States that this knowledge will always translate over to other countries.
Tip #4 – Be Aware of Potential Cultural Differences
It is important to be aware of cultural differences during the negotiation process, but this is really just the beginning. Cultural differences do not end once the negotiation process is over. They have ramifications in areas including everything from dealing with your staff and vendors to getting professional assistance from people such as local accountants and lawyers. You will need to be aware of cultural differences and perhaps even learn to speak the language if you want your business to be a thriving success.
Tip #5 – Hire a Business Broker
Business brokers are experts in buying and selling all kinds of businesses and that includes international businesses. There are many layers to owning an international business and business brokers can help you navigate the waters. The sizable expertise that a business broker brings to the table can help save you considerable amount of frustration and confusion.
These five tips are invaluable for helping you determine whether you should opt for an international business and/or how to proceed once you’ve decided to move forward. There can be big opportunities in owning an international business, but it is critical to proceed with a clear cut strategy.
Copyright: Business Brokerage Press, Inc.
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