Q: My wife is flipping out that we are going to have to put up the house to finance the business but isn’t there a way for me to buy a business without risking my home? I really don’t think I have the stomach for it.

B. Pattison – Omaha, NE

A: I don’t blame your wife!

Except for very rare circumstances you should not have to pledge your home to acquire a business.

Of course, if you go the route of traditional bank financing (SBA or other), yes, you will have to collateralize the loan with assets outside the business. That is why it’s so important to negotiate seller financing as part of the deal. First of all, seller financing goes a long way to validate the business, and his/her belief that you can run it.

Next, seller financing is a very normal part of small business transactions. 91% of my clients negotiate seller financing. Plus, a seller should/must accept the business’ assets as collateral. After all, they’ve usually spent considerable time selling you on how wonderful these assets are…right?

Now, you must also realize that you will have to sign personally, and you must be prepared to accept that condition but, no hard personal assets pledged. With seller financing you will have to personally guarantee the loan via a promissory note however the seller’s first lien will be against the business itself and then you. Rarely does it ever materialize that a seller comes after the buyer.

Often times, buyers tell me they don’t feel they should have to personally guarantee the seller note (obviously if you can negotiate around this, that’s great but rare) but I disagree for two reasons: A true entrepreneur is always prepared to put it on the line and bet on themselves to succeed. Second, if you’re not 100% convinced that the business is right for you, and will grow substantially with you as the owner, then in addition to your concern about a personal guarantee, you should also think about whether you should pursue the business at all.