Using "Buy Now, Pay Later" to Buy a Business

0:03 I have a question. If millions of people are using buy now pay later to buy crazy things like TVs, video games, watches, refrigerators, etc., why aren't they using that same tactic to buy a business? Hm. Like instead of using creative financing to buy things that lose value over time, why not we use that same strategy to buy things that generate cash flow in our sleep that unlocks packs of income and puts us on the fast track to financial freedom via business ownership? Buy a business. 12 million companies estimated to go up for sale in the next decade. So now I'm super curious. This sounds like a no-brainer. So let's find out exactly how we can use buy now pay later to buy a cash flowing business literally today. And it's crazy. I actually found some listings that you can purchase today using buy now pay later equivalent. And

0:49 that's exactly what we're going to unpack in this video. How you can achieve the dreams of ownership through buying a business. And by the way, I am all about business ownership. I'm Kenny Finance. I spent 10 plus years working at the greatest private equity firms in the entire world, Blackstone KKR, where we do nothing but buy, run, grow, and operate businesses. And I want to take everything I learned on Wall Street, give it to Main Street, and make sure that you guys are finding the best ways to find the greatest cash flow companies. And now we're going to talk about how to finance those using buy now pay later. All right, let's rock. Look, buy now pay later is not a new concept. It's been around since like the 1800s. Buy now pay later is essentially the same thing as an installment loan. Meaning, you find a

1:36 product or service you like. You put zero money down to obtain that product or service, but you pay a piece of the purchase price over time. Some of them come with interest and some of them do not come with interest. That is essentially you buy now, you own that product now and you pay for it over time. Pay later, B NPL, right? But for some crazy reason over the last like 3 to 5 years, buy now pay later has literally taken off. You can't buy anything online right now without seeing one of these three buy now pay their providers. Affirm, Afterpay, Cla, they are literally everywhere putting on the checkout pages, hey, buy this with zero money down and pay over 12 to 24 months for things like mattresses, TVs, you name it. Heck, I'm even seeing some

2:22 people buy things like movie tickets and groceries and food using buy now pay later. But this isn't a video about the dangers of buyer for very ridiculous consumer things. All my smart money people should know that you shouldn't really buy essential products and day-to-day discretionary purchases using binocular. That's not what we do here. And FYI, if you do use it, make sure you pay it off immediately because these things can have some crazy interest. But we're going to figure out how to use this to buy a business. Let me explain the setup for you a little bit. Did you know that in the next decade, there are going to be 12 million plus small business owners retiring, meaning almost 10,000 baby boomers per day retiring the businesses. And guess what? They do not know who they're going to retire or pass down their companies to. The kids don't want it. The employees don't know how to run the business. They're kind of left in limbo trying to figure out who's going to take the reigns of my cash flowing

3:09 business. And if you're a business buyer like us, this creates an incredible opportunity for you to find retiring baby boomers looking to give up and sell their businesses. And the wildest thing is these are not bad businesses. These are cash flowing, sometimes recession resistant businesses that are doing well, that have strong tailwinds. The thing is the owners ran out of gas. They worked very hard over the last 50, 60 years to take their business from zero to a million or zero to 10 million to whatever size that company is. They don't have the runway, the interest, maybe the age or the health to take that company to the next level because running a business is a full-time job. It requires time, dedication, thinking, traveling, all kinds of things. And the thing is, folks, when people want to retire, they want to chill. They don't want to take their business 3, four, 5x. So, if you're a millennial, if you're a

3:55 Gen Z, if you're a Gen, whatever the heck you are, if you are young and you have runway and you have intellect and resources to get in the reigns of a CEO seat and run a business, this is the greatest opportunity in the entire world for you. That's why I'm banking my entire career on this of buying interesting cash flowing businesses. You want to know why? They don't have the gas, they don't have the runway, but I have literally nothing but a Celsius and a cranked attitude to grow a business to a million dollars in sales. Plain and simple. Now, tying this back to buy now pay later. This is where it gets amazing. There's a concept called seller financing, which will allow for you to purchase up to 100% of a business's purchase price using a buy now pay later concept. Meaning that we don't pay any cash upfront to buy that business, but

4:40 we go to the owner and we say, "Hey, I will own the company from day one and I will pay you a piece of that purchase price over time." Mindblowing, right? And that shows that you don't need hundreds of thousands of dollars or millions of dollars in capital in your hand today to become a business owner. Just like you don't need $1,000 to buy that TV over time. Use buy now pay later. The same principle. You don't need to have a million dollar to buy a cash business right now. Zero money down seller financing and pay a piece of that purchase price to the seller over time. I'm putting you guys on game. Least you can do subscribe to the channel, baby. Let's rock. All right, let's roll up the sleeves. and I don't have any sleeves, but let's get tactical. What is seller

5:26 financing? I'm going to give you guys the private equity definition. So, seller financing is when the person selling the business becomes the lender to purchase the company. What that means is the buyer, you, as well as the seller, owner of business today, agrees on a purchase price. And once you agree on that purchase price, instead of paying everything upfront, you pay a piece of that purchase price to the owner of that business over time. All right, let's find out how real this actually is. So, I'm going to go on biz by sell and I'm going to try to find a listing in California and I'm going to try to see if I can find a business that is cash flowing that is open to seller financing. Let's check this out. Boom. Here we go. I found a profitable boba tea shop in San Diego that is open to seller financing. They're looking to sell the business for $160,000 and the company does around 98 grand of cash flow every single year.

6:11 And what's nuts is literally in the listing title they say seller financing. Let's see what we can get. So, this is amazing that we can own a 100% of a business doing about $100,000 of cash flow a year using seller financing. Meaning that we can put some or no money down upfront and pay a piece of the purchase price over time to the owner. Now, is Bob the greatest investment of all time? Can you find us and buy it? But this is just an example that seller financing deals do exist. You just have to be creative with it and you have to look into it. And FYI, if it is not right up front in your face on the listing, sometimes find a good business, negotiate with the banker or the owner and say, "Hey, I love your company. I still want to purchase it, but I want to have seller financing." Worst they can say is no. Just make sure you ask. Now, what's the smart money move here? The

6:57 smart money move, like I said, is to find a great cash flowing business, use up to 100% of seller financing, but that still doesn't equate to the greatest smartest deal that you can do if you're a Ky Finance community member. What we like to do is we like to find a business that has the financials and the profits and the cash flow to be able to cover a seller financing because like I said at the beginning, seller financing is essentially an installment loan where you put zero money down, but you pay a piece of that purchase price over time to the owner. It's just like having a loan that you have to use the cash flow to pay down. And oftent times with seller financing, they do come with an interest rate. And the smart money principle here is to make sure you find a business that has sufficient cash flow to pay down all of its debt obligations and the interest. Meaning, you need to be able to pay down a piece of that

7:43 seller financing note every single year plus whatever interest is incurred as well. So, let's run the numbers and let's do an illustrative example. Let's say I found a great cash flowing laundromat that is looking to sell for $1 million and we want to do 100% seller financing. Now, with that 100% seller financing, they are open to doing that at a 10% annual interest rate. Meaning, our annual interest payment is going to be that $1 million times 10% annual interest. That is going to mean we have to pay in interest $100,000 to the owner. But then also, they want that seller financing note to be paid down over 10 years. So you take that $1 million divided by 10 years, meaning that you have to pay $100,000 per year to purchase that

8:30 business plus the $100,000 in interest. So whenever we are looking at a business that is like this, we need to ensure that that laundromat has more significantly more than $200,000 to cover the principal and the interest payments. And as always, we put this stuff into practice. And I found an amazing award-winning laundromat sitting in New Jersey, people. And this one is asking for $1.1 million and it does annual cash flow of around $300,000 per year. And they're open to seller financing. So let's run the numbers. As I said, at $1.1 million, the interest is going to be 10% per year. So $110,000 annually in interest plus a 10-year amatization or payown schedule of that seller financing note. Meaning every single year we have to pay down

9:15 $110,000. So, our debt obligations is $220,000, but the business today with no debt is doing $300,000 of cash flow. So, you take that $300,000 of cash flow less the $220,000 of your seller note obligations, interest, plus principal, and that leaves you with $80,000 of free cash flow after debt. Is that an amazing free cash flow number? No. There's other better deals out there, but that just shows that you can own a business that is kind of running itself. Laundry masks don't require that much day-to-day attention and collect $80,000 just annually for free cash flow. And you can use that $80,000 to invest in more washers or dryers to expand your capacity, which increases your revenue. And if your revenue increases, your

10:02 costs remain the same, your cash flow is going to increase as well. taking the 800,000 to maybe a h 100red to maybe 150 to maybe $200,000. You can reinvest and grow into that business. Or if you need the money, you can use it to pay yourself. That just shows the different avenues of what you can do with that cash flow after you pay down the seller note. You can think about paying yourself. You can think about reinvesting into the business or saving up that 80 grand over a handful of years and buying yourself a second or third laundromat. Now, we're talking mobile status. All right? So, that's the math that I want you to do every single time you look at a deal. Find out what the cash flow is of the business today. How much are they generating? And then find out if you were to use seller financing 100%, what would those loan obligations look like in interest plus principal? But then also really important thing

10:48 that I want you all to do is pressure test the numbers. Meaning if we had a bad month or a bad year where our revenue was flat or our sales declined 10 20%. Would we still have enough cash flow to pay our debt obligations? Because here's the thing, that seller financing is still a loan. Meaning, you do not want to default with the owner on their principal or their interest payments. And with this example of this New Jersey laundry mat, they're only having $800,000 if we cash out the debt. That might be a little tough. That might be a little tricky. So, what we want to do is maybe find a business that does 400, $500, $600,000 of cash flow still at that $1 million purchase price because it gives us more of a cushion in case things go wrong operationally in the business. Now, the numbers made

11:33 sense. I'm okay with that. But the big question that I still had was why the heck would a owner be open to this kind of structure. Well, it's kind of simple. They love the business. They have conviction and the ability for this company to generate cash flow. They don't have any gas left in the tank to grow this company to the next level. But they still like to collect cash from this business. And what's the best way to remove yourself operationally from a company and still collect cash every single month, every single year from a business you built? Embed a seller financing note to where you get piece of the profits for 10 plus years and interest. And you don't have to put a single finger on that business ever again. So, you get to put in a brand new owner that's young, that's ambitious, and that can take your business to the next level and sit back in Florida on

12:20 your yacht, on your vacation home, and just collect hundreds of thousands of dollars of cash. That's one of the greatest forms of passive income that exists. So, if you are a business owner today and you're thinking about selling your business, I highly encourage you guys to think about selling to a young, capable, ambitious, and scrappy business buyer like me or anyone else out there. and make sure that you can get a piece of the pie by collecting cash through a seller note and holding it for 5 10 plus years. It's a great passive income deal, I'm telling you. So, the exact same strategy how you're thinking about buying that next mattress or that TV, think a little bit smarter and use that same creative financing tactic to buy yourself a cash flowing business because as we just shown, there are deals out there that exist. It's about structuring it the right way. It's about applying a

13:06 sensitivity to make sure that that business in good times or bad can withhold a debt obligation like a seller note and then focusing on growing the business to expand the cash flows. And if you can do that, you can literally print money in your sleep and buy great cash flowing businesses with no money down. So now that we've mastered the buy now pay later to go buy a business, let's put this into practice and find what cool recession resilient businesses that we can go buy today. And in this next video, I highlight my favorite 10 businesses that are recession resilient and that are printing cash flow. Things like laundry mats, things like auto repair shops. And I'm telling you, you don't want to miss this. And I'll catch you guys on that next video. Peace.