2026 Guide: How to Raise Capital to Buy a Business with Other People's Money
by Raises.com
You can acquire a business using other people's money by combining debt financing with equity from investors, focusing on profitable, asset-rich companies and structuring the deal to cover interest and cash-flow needs. The key is to match the cash flow of the target to the financing costs and to involve investors early in the process.
Concrete lessons from the video
- Step 1: Choose an industry you understand. Focus on a niche where you have expertise so you avoid competition disadvantages and can evaluate the business quickly.
- Step 2: Define the financing mix early. Identify potential lenders and equity investors before you negotiate the purchase price.
- Step 3: Verify cash flow covers debt service. In the example a $1,000,000 acquisition uses a $500,000 loan at 10% interest, requiring roughly $50,000 annual payment; the business must generate profit above that amount.
- Step 4: Leverage real-estate assets when possible. Properties attached to a business raise the loan-to-value ratio, allowing you to borrow a larger percentage of the purchase price.
- Step 5: Structure equity contributions. Split the equity portion between investors and yourself; for a $1,000,000 deal you could have a $500,000 loan, a $300,000 investor equity stake, and $200,000 of your own cash.
- Step 6: Keep legal compliance front-and-center. Work with lawyers to draft the PPM, subscription agreement, operating agreement, and other required documents.
- Step 7: Use professional service providers. Raises.com can deliver a full SPV structure, financial pro-formas, data room, pitch deck, and introductions to debt and equity investors.
Financing options compared
| Feature | Debt Only | Equity Only | Hybrid (Debt + Equity) |
|---|---|---|---|
| Source of funds | Bank or private lender | Investors buying ownership | Combination of lender loan and investor equity |
| Ownership dilution | None | Full dilution to investors | Partial dilution based on equity share |
| Repayment obligation | Fixed interest and principal schedule | No regular payments, profit sharing | Interest on loan plus profit sharing on equity |
| Typical LTV (loan-to-value) | 40-60% without real estate, up to 80% with property | 0% (no loan) | Blend of both; can achieve 60-70% effective leverage |
| Best for | Cash-flow stable businesses with strong assets | High-growth businesses lacking collateral | Businesses that have cash flow and some asset backing |
Applying the lessons to your next acquisition
Start by drafting a one-page deal memo that outlines the target industry, purchase price, and projected cash flow. Then identify at least two potential equity investors and a lender willing to fund up to 50% of the price. Run a cash-flow test using the $500,000 loan at 10% interest example: ensure annual profit exceeds $50,000 after operating costs. Finally, engage a lawyer to prepare the SPV structure and subscription documents before you approach investors.
Frequently asked questions
How can I use other people's money to buy a business?
You combine a loan from a lender with equity contributions from investors to cover the purchase price while preserving your own cash.
What is the minimum equity needed for a business acquisition?
Equity can be as low as 10-20% of the purchase price if the lender is comfortable with a high loan-to-value ratio backed by real estate.
Can I finance a business without real estate collateral?
Yes, but lenders typically offer lower loan-to-value ratios and may require higher equity stakes.
What interest rate is realistic for a $500,000 loan on a cash-flowing business?
Rates around 8-12% are common, depending on the business's risk profile and the lender's criteria.
Do I need a lawyer to raise capital for a business purchase?
Legal counsel is essential to draft the PPM, subscription agreement, and operating agreement and to ensure compliance with securities regulations.
Next steps
Raises.com has helped clients raise over $300M across documented case studies. Learn more about our flat-fee, no-carry model and how we can build your SPV, pitch deck, and investor introductions by visiting how it works or book a call today.