How to Buy a $500K Internet Business With $75K Down and No Personal Guarantee

Today, I’m going to cover a wealth hack.

I’m going to show you exactly how to buy a business using other people’s money.

More importantly, I’ll show you how to do it without an SBA loan, which requires a personal guarantee.

You will have no excuse. Now anyone with a small pile of savings (and a low risk tolerance) can buy their first cash flowing internet business.

Here’s the process at a high level:

• Identify a profitable, internet business that’s been sitting on the market

• Secure Boopos non-recourse financing (no personal guarantee!)

• Round out your offer with a 12-month seller note and an earn-out

• Grow the business and exit within 3-5 years​

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Step 1: Identify a profitable, online business that’s been overlooked

I recommend you start by registering with an online marketplace like Empire Flippers.

Empire Flippers is one of the top free marketplaces for buying and selling online businesses.

Since it’s free to use, the site is a great place to start for the first time buyer.​

Once you register, here are the filters to use:

• Status: uncheck all categories except “For Sale”

• Listing Price: I’d recommend a $250K-$750K range (uncheck unpriced listings)

• Private Lender Approved: Yes

The logic here is you want to find an asset that’s either fallen out of favor or has some hair on it.

Hair shouldn’t scare you. Remember, we’re crafting an offer that requires very little equity and no personal guarantee. Solve for the upside, control for the downside.

You will find 90% of assets that meet these filters will be eCommerce (and likely Amazon FBA). That's fine, but not ideal.

If possible, look for content businesses. They’re more capitally efficient (no inventory), easier to scale and often quite simple on the tech side.

However, you can still execute this strategy with an Amazon FBA business.

If you do, try to look for these attributes:

• Founded at least 3 years ago.

• Evergreen niche (eg. baby, home, office,). Avoid fads. Avoid tech.

• Limited seasonality. Avoid holiday brands.

• Revenue and profits are growing or stable.

• No single SKU accounts for more than 20% of revenue.

• COGS % of revenue < 30%.

• Total advertising cost of sales “TACOS” < 10%.

• Net profit margin > 20%.

You may not be able to meet all of these criteria, but try to hit most of them. If any of those are confusing to you, shoot me an email. I’ll try my best to clarify.

Here’s an example of an asset recently for sale that could work. It’s not perfect, but it’s close:​

Highlights: Evergreen niche, low COGS, healthy net margins, growing revenue and profit.

Opportunities: Consolidate SKUs, optimize ad spend.

Once you’ve identified a potential asset, move to the next step.​

Step 2: Secure Boopos non-recourse financing​

​​Boopos is a revenue-based lender that has a partnership with Empire Flippers.

The funding terms are highly favorable to buyers:

• Debt up to 80% of purchase price

• No personal guarantee (unlike SBA)

• Non-dilutive financing (it’s debt, not equity)

• Up to 6 year amortization period and interest-only option for first 12 months

• Revenue-based repayment terms

• 48-hour approval and funds available in as little as 7 days

Monthly payments are made based on a percentage of your monthly revenue. This is not a fixed dollar amount, so if your business has a strong month, you will pay down more of the loan, and in less profitable months you will owe a smaller payment.

There is also flexibility on when you payback the loan. If you optimize for cashflow, you’ll probably use a 6 year repayment plan with interest only due the first year. You can expect a blended 10% interest rate over the life of the loan, with a higher rate paid upfront. Rates can change and the mechanics can get a bit more nuanced.

You can and should verify the latest information with Boopos directly.​

Step 3: Round out your offer with a 12-month seller note and an earn-out

Let’s assume after a call or two with the seller you learn there’s been no formal offers, the business has been on market for 4 months and the seller is eager to sell because he wants to buy a house.

Great, here’s how you might structure an offer:

• Total Consideration: $500K (10% below ask)

• Cash at Close: $325K ($75K of your equity + $250K Boopos financing, 50% of offer price)

• Seller Financing: $100K (Paid to seller over 12 months at 5% interest)

• Earn-out: $75K (50% of all profits paid to the seller above $150K, the LTM profit)

I like this structure because it rewards the seller with a strong guaranteed value ($425K) and leaves some upside in the form of an earn-out. The seller may also like that the consideration is split across 2 tax years, which will boost what they keep after taxes.

And remember, a seller with no other offers on the table might be open to a below ask offer.

Let’s look at year 1 cashflows based on this offer:

• Profit: $165K (assumes we grow profits by just 10%)

• (-) $105K Seller Note (5% interest, 12-month term)

• (-) $37.5K Boopos debt (estimate, assumes interest-only year 1)

• (-) $7.5K Earn-out

• Cashflow: $15K

It gets much better year 2:

• Profit: $180K (~10% growth again)

• (-) $100K Boopos debt (estimate, assumes principal + interest) **

• Cashflow: $80K

** About half of that Boopos payment goes to paying down the principal on the loan, which you’ll ultimately recover when you exit the business.​

The Path to a Million Dollar Exit in 3 Years

The goal is not to earn a bunch of money in that first year.

Essentially you are using the cash flows from the business that first year to fund the 12-month Seller Note.

Now let’s assume you’re able to double the business’ profits over a 5 year hold — so you take it from $150K to $300K of annual profit.

In that time you’re repaying the Boopos loan entirely AND cashing six-figures of pre-tax income years 3-5.

Here’s what your exit could look like:

• LTM Profits: $300K

• Exit Multiple: 4x

• Sale Price: $1.2M

• (-) Closing Costs: $100K

• Your Pre-Tax Take Home: $1.1M

Congratulations, you just turned a $75K investment into well over $1M dollars in just five years, without taking on a personal guarantee.

What’s the catch?

There really is none.

If you structure the deal right you shouldn’t have any monetary risk beyond your initial equity.

Boopos financing is collaterized by the assets in the business. In other words, if you default on the loan, Boopos will take control of the business.

Ultimately, like most lenders, Boopos does not want this outcome. They aren’t operators. Even in the worse case scenario where you can’t make your debt payments, Boopos will work with you to give you time to turn things around.

If there is a catch it’s that executing this strategy takes time. And depending on the size, you may be a sole operator, which means a lot of the work falls on you.

So make sure this is the right path for your situation. I always encourage my readers to place a high value on their time. It’s a finite resource; money is not.

I’ve used creative financing on all of my small business acquisitions.

I’ll be sharing more strategies like this in future newsletters.

If you enjoyed this content I’d love if you could share it with a friend and encourage them to subscribe. Or just send me an email and let me know you found value in it.

The encouragement goes a long way.

Until next week,​

Danny

PS: Feel free to reply, this is my actual email.