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Buying Out a Business Partner: Benefits & Financing Options

When you first started your small business you likely enjoyed having a partner to share in the startup expenses, risks, responsibilities and even successes.

As time has gone on, and the company has become more stable, you may be wondering if a partner buyout is a viable option.

How a Business Partner Buyout Can Help You:

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Buying out a business partner can be extremely beneficial:

On the other hand you will no longer have a partner to share business risks and expenses with. However, if your company has reached a level of success where your risk level is minimal, this could be a great option for you.

How to Pay for a Business Partner Buyout

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Financing a business partner buyout can be difficult if you do not personally have the cash on hand to pay your partner.

If you do not have the money, here are your top options:

Each of these options has its pros and cons which we’ll discuss now.

Traditional Business Bank Loan

A traditional business bank loan will likely come with the most attractive terms, but will be difficult to obtain because the money will not directly benefit the company in any way since it will go right into the partner’s wallet. Many banks simply won’t finance this type of opportunity.

Even if you do find a bank willing to take on the risk, approval for a traditional business bank loan can take months, which may be a time period that you’re not willing or able to wait.

Merchant Cash Advance 

A merchant cash advance is an option for the buyout, but you can expect bad terms that may hurt your cash flow.

When you take out a cash advance, the company typically purchases a fixed amount of your future credit card sales at a discount rate of about 38%. The advance is paid back from a percentage of your daily credit card receipts until the full amount is paid in full.

The higher your sales, the quicker the advance is paid back thus raising the cost of funds significantly. In fact, APRs can range from 50% up to 200%!

This is an option of last resort.

Mezzanine Loan 

A mezzanine loan can be a great option for small business owners looking to buy out a business partner. This type of loan is perfect for small companies that are experiencing strong performance but need an injection of capital to take advantage of  an opportunity, without giving up equity.

When obtaining a mezzanine loan through ARF Financial, collateral is not required for loan amounts up to $725,000.

Unlike a merchant cash advance, payments are fixed and you can enjoy flexible terms up to 18 months helping you preserve cash flow during the transition.

If you’re ready to buy out a business partner, apply now for a Mezzanine Loan through ARF Financial.

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To get started just click the link above and fill out the loan quote form on the right hand side of the page.

Getting a quote does not obligate you to do anything. We’ll simply contact you so you can learn more about the loan process, and we’ll let you know how large of a loan you can expect to be approved for to buyout your business partner.

A business partner buyout will put 100% of the company’s profit in your pocket. What are you waiting for?

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