We have an opportunity to buy an interesting business over the next 5 to 10 years. How can we finance this?

My wife and I are 40 years old and we are preparing our "retirement" project. We have an opportunity to buy a very interesting business over the next 5 to 10 years. The seller is willing to work with us so that we can learn all the details of the business before we are finally the owners. So here is the question: what are the options to finance such an operation? Our own estimation is that this business is worth about 3 to 4 M$. Of course, there will be a due diligence that will be conducted. We do not have much net value... about 500k$. As much as possible, I would like to keep my actual job so that the bills are paid until the business is stable. Yes, the business can be driven while I keep my actual job. And, by the way, my wife would totally available for the new business.

Public Comments

1. Why do you believe the business is worth 3 to 4 million? The reason I ask is it makes a difference on how you go about getting financing. For example if the business is worth 3 to 4 million because it has that much in equipment, you could then consider a lease agreement secured by the equipment to get the money needed. If you say that the business has that value based on the "free" cash flow (free means cash inflows that are not needed to pay operating bills) then you can consider a traditional bank loan or accounts receivable financing agreement. To really answer your question in detail I would need to know more about the business you are buying.
2. Let me tell you at the onset that I am not a financial guy, but I have stayed at the Holiday Inn. If the seller will let you become a partner in the business for a few years and let you ease into the business, get to know the business with their help (they have a vested interest in keeping the business profitable as equal partners), get to know the customers and the product line(s) then buy the seller out in full when you are the recognized owner and know the ropes. During the internship you will be making the money to buy the seller out too.