An investor buys a $10 million freight company with just $1 million down using SBA loans and seller financing. By boosting EBITDA from $2 million to $3 million in two years, the valuation jumps to $21 million. That $1 million becomes $11 million profit.
Did you know that you can buy a $10 million company without $10 million in cash? It's called leverage business acquisitions. And here's how they are structured. Let's say you find a freight company making $2 million in EBITDA, which is business nerd, for earnings before interest, taxes, depreciation, and amortization. Now, because it's small, private, and under optimized, it trades at five times the value in the market. That puts the sale price at 10 million. But here's what rich people don't want you to know. You don't need $10 million. With an SBA loan, often combined with seller financing, you can put down as little as 10%. That's $1 million. So on day one, you control a $10 million company with $1 million of your own capital. And if you run that company properly, over the course of two years, the value can go from $2 million to $3 million. Not many know this, but that jump in revenue allows you to sell at seven times the value instead of five times. This is because your company is bigger and operations are smoother. So that $3 million turns into $21 million, which means that you use $1 million to create $21 million in two years. That's how leverage works in business acquisitions.
