{"id":203940,"date":"2026-05-28T14:38:00","date_gmt":"2026-05-28T21:38:00","guid":{"rendered":"https:\/\/www.nationalfunding.com\/blog\/?p=203940"},"modified":"2026-05-28T15:10:23","modified_gmt":"2026-05-28T22:10:23","slug":"buying-a-small-business-what-you-need-to-know","status":"publish","type":"post","link":"https:\/\/www.nationalfunding.com\/blog\/buying-a-small-business-what-you-need-to-know\/","title":{"rendered":"11 Things to Know Before You Buy a Small Business"},"content":{"rendered":"

Buying a small business, even a profitable one, comes with surprises in\u00a0almost all\u00a0situations. It could be machinery that is currently\u00a0operating\u00a0nicely, but only because the owner knows how to fix and repair\u00a0it\u00a0and that skill leaves when their contractual term is done. If you\u00a0haven\u2019t\u00a0talked to suppliers and vendors to fully\u00a0learn about\u00a0the\u00a0logistics\u00a0and supply chain demands, there could be favorable terms based on relationships that\u00a0impact\u00a0cash flows and\u00a0won\u2019t\u00a0be available under new ownership.<\/span>\u00a0<\/span><\/p>\n

\u00a0<\/span>These are things that show up in the books, but understanding the \u201cwhy\u201d the numbers look good only comes from asking the right questions, digging into the details, and learning how the cash flow stabilizes and where new expenses will show up once the current owner exits in full.\u00a0\u00a0<\/span>\u00a0<\/span><\/p>\n

\u00a0<\/span>Each small business is going to have different surprises and challenges. A small business where the owner is part of the branding and is the face of the company, like family restaurants and trusted service\u00a0providers,\u00a0will need to transfer that brand trust to the new owners for a smooth transition. Franchises will have rules and restrictions that privately owned businesses will not face as the privately owned business controls their own operating details, assuming\u00a0there\u2019s\u00a0no investors or debt like\u00a0<\/span>small business loans<\/span><\/a>\u00a0or\u00a0<\/span>mezzanine financing<\/span><\/a>\u00a0where collateral could be guaranteed to the financier until the debts are paid off.\u00a0\u00a0<\/span>\u00a0<\/span><\/p>\n

\u00a0<\/span>Here are 11 things\u00a0you\u2019ll\u00a0want to know before you decide to buy an existing small business so you can be prepared and feel confident the purchase is one that makes sense for you.<\/span>\u00a0<\/span><\/p>\n

The Time\u00a0From\u00a0Offer to Closing<\/span>\u00a0<\/span><\/h2>\n

A privately owned business with no debts and where the owner is ready to exit will close faster than a business whose owners have\u00a0<\/span>trade credits<\/span><\/a>, business loans, and investors because there are less third parties that need to approve the sale. If you have a pre-existing relationship with the business owner and have done your due diligence, you could close as quickly as three months, including taking an acquisition loan to cover the costs.<\/span>\u00a0<\/span><\/p>\n

Franchise resales can take anywhere from\u00a04 to 8\u00a0months.\u00a0You\u2019ll\u00a0want to do your due diligence and study all financials, meet the team, and complete other review steps.\u00a0Then,\u00a0you need to get\u00a0an approval\u00a0from the franchising company, apply for financing, go through training, and finally do the legal and closing paperwork to take ownership.<\/span>\u00a0<\/span><\/p>\n

\u00a0<\/span>For a small business with debts that have collateral like a business loan,\u00a0investors\u00a0or stakeholders, you should expect the process to take between 6-12 months. After the due diligence step, you\u2019ll likely be required to sign an NDA, then review the Profit and Loss statements (P&L), find any assets pledged to third parties, get a sign off from investors and stakeholders, and see how many\u00a0outstanding\u00a0obligations, such as merchant cash advances, which may need to be settled before the sale<\/span>\u00a0<\/span><\/p>\n

Maintaining Brand Trust<\/span>\u00a0<\/span><\/h3>\n

The restaurant or HVAC company\u00a0you\u2019re\u00a0buying can have amazing food or a fantastic reputation for showing up on time and late at\u00a0night,\u00a0which is why\u00a0it’s\u00a0always busy. But this could be the current owner\u2019s family recipes or their interactions with customers, or because the current owner has a trustworthy face and is known in the community, so residents trust them in their homes.<\/span>\u00a0<\/span><\/p>\n

\u00a0<\/span>Once the face of the company is no longer there,\u00a0you\u2019ll\u00a0need to build that same level of trust and brand with the community. Talk to customers and get honest reactions to the owner selling, see if your style can match the original\u00a0owners\u00a0to keep them coming back once their \u201cfriendly neighbor\u201d has exited, and create a plan to replace the inevitable churn.<\/span>\u00a0<\/span><\/p>\n

\u00a0<\/span>You\u2019ll\u00a0also want to make sure there is an advertising budget where you can run ads about \u201cnew ownership, same great service\u201d or \u201cthe quality you love.\u201d Then, begin looking at how you can\u00a0build on\u00a0it based on their\u00a0feedback,\u00a0so the customer base knows things are about to get even better for them.\u00a0\u00a0<\/span>\u00a0<\/span><\/p>\n

\u00a0<\/span>Pro-tip: Make sure there is a clause that keeps the current owner engaged long enough to help customers trust you as the new owner.\u00a0Usually\u00a01 to 3 years is a good\u00a0ballpark, but many can clear in under 2 years\u2019 time.<\/span>\u00a0<\/span><\/p>\n

Gather All Financial Documents<\/span>\u00a0<\/span><\/h3>\n

One of the most vital types of information\u00a0you\u2019ll\u00a0need from any business\u00a0in order to\u00a0make an informed decision is financial data. Thoroughly examining and understanding the documents included in this list will take time and\u00a0effort, but\u00a0is one of the most important steps to help prevent some of the unexpected surprises that come after buying small businesses.\u00a0<\/span>\u00a0<\/span><\/p>\n