How I Took Over a Failing Business without money and secured an SBA Loan Without Collateral (2018)

Why did I want to be an entrepreneur?

 

In 2019, I officially started my journey as an entrepreneur. Before this, I had worked for two years as a physical therapist, as an employee at two different practices. During that time, I couldn’t help but notice how inefficiently these businesses were run.

Why were they so inefficient?
Why did some practices have long waiting lists, while others struggled to attract patients?
Why was there zero commercial mindset in these companies?
After all, they were businesses right?

In the summer of 2018, the company where I was working had already been for sale for five years but nobody wanted to buy the physical therapy practice. Around five entrepreneurs had inquired about a possible acquisition, but every one of them backed out the moment they saw the financials.

The practice was in decline. The owner was nearing retirement and had lost the motivation to put effort into the business. Patient numbers had been decreasing since 2015, and I noticed it too, appointment schedules were getting emptier every year.

 

Buying a Business vs. Starting a Business: Why buying a failing Business Might Be a Smarter Investment

 

That summer, a thought came up to me from time to time. Maybe I should talk to the owner. I had always planned on starting my own business in the future, but maybe that future was now. But I was only 23 years old at that time, how am I going to do all this?! I thought.

I decided to risk it and started a conversation with the owner. To my surprise, he reacted enthusiastically. He told me that if I was serious, I could sign an NDA and take a closer look at the company’s revenues, expenses and profits.

A week later, I signed the NDA and received all the financial details. That’s when my suspicions were confirmed:

• The practice had a revenue of $190K.
• The profit was only $25K even worse, this was before the owner paid himself a salary.
• This meant the owner was working 40 hours per week for just $25K in annual profit.

The company was valued at $125K, based on the profitability and the value of the equipment. This wasn’t a lot, but for the revenue the company was generating it should have been even lower.

When I checked the EBITDA multiple for the paramedic industry, the commonly used factor was 5. Now, with the profit only being $25K, I couldn’t even use EBITDA because the owner still needed to pay himself a salary.

This meant that the valuation was based solely on goodwill and equipment.

The asking price of the physical therapy practice started in 2013 at $250K, but over the years, the owner had dropped his asking price to $125K.

But to me, it still felt like a lot of money for a 23-year-old who only had $10K in savings and still lived with his parents.

However, there was a silver lining to this price. Because the valuation was relatively low, it would actually make it easier for me to take over the business. 

For €125K, I would get:

• A (partially) active client base.
• A fully equipped location, even though the equipment was old.
• An employee, who was still my colleague at that point.

If you want to read the full thought process behind buying or starting from scratch, read the full article: insert link buying vs starting from scratch.

The asking price to buy a business, should I negotiate or not?

 

I started calculating. Starting a new business from scratch would not only be more expensive but would also come with way more challenges:

1. Finding a new location – This would take time, and once I found one, I would already have to start paying rent and renovate the space.
2. Buying new equipment and furniture – I would have to invest in everything: treatment equipment, furniture, paint, signage, and general improvements.
3. No existing client base – I would be starting completely from zero, meaning no revenue at all while trying to build a reputation.

After calculating, I realized that to even start a new practice, I would need at least €125K and that was without considering all the ongoing costs like rent, utilities, salaries, and accountant fees in the first few months. 

The first few months in a new business are hard because you don’t have a lot of revenue coming in at first, but you still need to pay for all your expenses.

This means that for the first few months, you are operating at a loss.

To me, the real advantage of buying this practice was that for €125K, I wasn’t just buying a struggling business, I was buying a complete framework that I could immediately improve and grow. I would basically skip 2 or 3 years compared to starting the business from scratch.

By skipping the entire startup phase, I could focus directly on fixing inefficiencies, implementing changes, and building up the practice again.

Once I realized this, everything in my mind clicked and suddenly I realized this could turn out into a great deal.

So I considered my options on the selling price.

The owner really wanted his practice sold since he was nearing retirement age and seriously wanted to stop. Was I able to offer him a lower price and maybe buy the physical therapy practice for $100K?

But I also kept in mind that in the years before, other entrepreneurs had also tried to make a lowball offer to the owner, and that didn’t work out well. He would immediately show them the door, irritated and angry, with the deal off the table.

My Final Conclusion:

 

• Offer $125K – At this price, I would be sure that I would have the practice. Although maybe not worth the full $125K, I would make up for it by improving the profitability of the practice in the first year.
• Offer $100K – At this price, I could either save $25K or risk blowing it all away and being shown the door, just like the other bidders before me.

I calculated that paying an extra $25K back to the bank over 5 years would only cost me around $450 in SBA loan repayments and interest per month.

This was nothing compared to the chance of losing the entire deal. So when looking at the risk vs. reward, I decided to go with a bid of $125K. The owner agreed to the price, and we suddenly had a deal!

In this way, the negotiations were a breeze and we were done in ten minutes!

But now, a new challenge arose—how was I going to finance this?

The owner didn’t want to do a seller’s finance as he wanted out of the business with cash in hand, so that option was off the table.

At that time, I had only saved up €10K. I had just started working a few years earlier, and up until then, I had been living life for the weekends, without a direction in life, living with my parents, partying during the weekends, and not really thinking about big financial commitments. I had enjoyed that lifestyle, but now it suddenly became a problem.

Buying a Business without Money

Banks almost always require entrepreneurs a down payment or a collateral such as your own house before approving an SBA loan. But in my case? I had almost nothing, only a mere 10k and with that money I wouldn’t even be able to pay a 10% down payment.

I needed a solution.

The Breakthrough with the Bank

 

I scheduled a meeting with the local bank’s account manager and had a very open and honest conversation. I explained my vision, enthusiasm, and plans on how to turnaround a struggling business. During the conversation I also made it clear that I didn’t have any funds or collateral to use. 

The account manager frowned and said the SBA loan would most certainly be declined.

He explained that right now, the business had only $25K in profit, and I would have to pay myself a salary, which meant there would be no money left for the business to make the $27.5K yearly SBA loan repayments and interest.

But the account manager saw my passion and drive. He told me that if I could come up with a clear and well made business plan, they might be willing to approve the SBA loan without a personal down payment. Instead, they would use the equipment of the practice which had a value of $50k as collateral and would have me sign a life insurance and a personal guarantee because the collateral didn’t fully cover the SBA loan. The only thing that helped me was that I was buying an existing business which gave me more chance of securing an SBA loan compared to starting a business from scratch.

This was a huge opportunity because it meant I had a possibility to buy a business without money, even without using personal funds. 

A Head Start on My Business Plan

Luckily, I had already been working on a business plan, even before I knew I would need one.

During slow hours at the practice, when I had no patients, I would write down ideas for improvements simply out of boredom. Over time, this turned into a detailed plan full of potential optimizations.

This gave me a significant head start when the bank asked for a clear business plan on how I planned to revive the struggling business.

I confidently told the account manager that within two weeks, he would receive my full business plan with the explanation of how to turnaround this failing business.

Business Turnaround: How I Increased Revenue & Cut Costs After Buying a Struggling Business

 

First I wanted to show how I would increase my revenue and start getting the agenda full with patients again.

1. Transforming the Website and using an Online Booking System

• The website was severely outdated, having not been updated in five years. 
• It was not designed for fast appointment scheduling— possible patients only could make an appointment through a phone call.
• Solution: Develop a new website that encourages visitors to book an appointment instantly online. This would also reduce phone calls during working hours.
• Add a WhatsApp Business Button so potential customers could message directly.
• Implement a “Book an Appointment” button, allowing customers to schedule appointments themselves within the medical administration system.

2. Developing a Digital Marketing Strategy that would generate revenue

• No structured marketing approach had been used in the last years.
• The existing efforts were totally random and ineffective (money was spent on sponsorships with zero measurable results).
• No presence on Facebook, Instagram, or Google Ads.
• I had already secured social media handles in my time as an employee.
• Plan: Run targeted ads on Social media and Google to attract new patients.

3. Increasing Brand Awareness

• Despite being located in a busy city center location and paying a high rent for it, the practice was barely visible to people who walked by.
• Solution: Change the building signage to clearly communicate what the business was.
• Issue: I didn’t have the funds yet (€5,000 needed).
• Plan: Save up and reinvest profits to fund the new signage.

4. Expanding Operating Hours to Attract More Customers

• Because of the limited opening hours, the practice mostly saw elderly patients.
• Weekday evenings and weekends were completely closed, making it impossible for the working class, students etc. to book appointments.
• Solution:
  • Open on monday and thursday until 9:00 PM
  • Open on Saturdays from 8:00 AM to 2:00 PM.
  • This meant I would have to work six days a week for the next few years, but this had to be done if I wanted to get approved for the SBA loan.

5. Establishing a Unique Selling Point (USP)

• The practice had no clear differentiation from competitors, making it not stand out from the competitors.
• The appointment schedule was only 55–60% full, leaving room for rapid growth.
• Solution: Introduce a powerful USP—“Always make an appointment within 24 hours.”
  • Patients experiencing pain want relief immediately.
  • Competing practices sometimes had long waiting lists, which I thought was unacceptable.
  • By offering same-day or next-day appointments, I could stand out immediately without having a lot of experience as a physical therapist.
• Afterwards, this decision turned out to be one of the best I ever made.

With all these planned improvements, I was fully confident that the practice could turn around and become a profitable, growing business.

I just needed the SBA loan to make it happen. 

I would initially have to work at least 70 to 80 hours per week to get the practice back on track, but I was more than willing to do so.

All the ideas mentioned above were incorporated into my business plan, with a detailed breakdown of how these changes would lead to a higher revenue.

As my business plan took shape and I gained deeper insight into the company’s financials, many things became clearer, especially the expenses.

How did I Reduce Business expenses to Increase Profitability

 

When I took a thorough look through the business expenses of the practice, My mind was blown. I quickly realized that I could immediately cut costs by approximately €50K per year simply by eliminating unnecessary expenses. During the years, the owner had built up so many unnecessary expenses. 

This would be my lifeline to secure the SBA loan! The manager told me he wanted to see clear results, and this was it!

By reducing the expenses of the company, I could immediately improve profitability and prove to the banks that I would be able to repay my SBA loan from the start!

With this idea in mind, I immediately went to work.

How I reduced my business expenses:

 

1. Reducing Accounting Costs
   • The previous owner outsourced everything to an expensive accountant, costing $1,000 per month.
   • By taking over some administrative tasks myself, I negotiated the fee down to $300 per month.
   • Annual savings: $8.4K
2. Optimizing Car Lease Expenses
   • The practice was paying $900 per month for an expensive leased car.
   • I switched to a cheaper lease, Istill needed my own car, but not one that expensive. This cost cutting strategy reduced costs to $300 per month.
   • Annual savings: $7.2K
3. Negotiating Rent
   • The rental contract would expire on 1 january 2019, this meant that I had leverage to negotiate the rental contract.
   • The practice was located in a prime area, with a rent of $3,800 per month.
   • After tough negotiations (including a bluff about moving locations), the landlord agreed to lower the rent to $3,100 per month.
   • Annual savings: $8.4K
4. Eliminating Ineffective Marketing & Website Costs
   • The business was spending $1,000 per month on website maintenance and poor marketing.
   • I canceled the contract and had a new website built by a friend, reducing costs to $200 per month. This expense would increase a bit in 2019 because of the marketing costs, but for now it was $200.
   • Annual savings: $9.6K
5. Working More Hours Myself
   • As an employee, I had been working 20 hours per week, earning $1,600 per month.
   • The previous owner worked 40 hours per week.
   • By combining both roles and working 40 hours per week, I eliminated double salary costs.
   • Annual savings: $19.2K

Total Cost Savings: €52.8K Per Year

These changes immediately improved the business’s profit margins and suddenly, the business started to look much more financially healthy.

I realized that while my ways to improve revenue were important, the bank cared more about cost-cutting measures that would have an immediate effect. By this way, I had proven that it was possible to increase the profitability of the company in a way that I could repay my SBA loan!

Next, in my business plan, I outlined my financial projections for 2019. I wrote down the following:

• $240,000 in revenue (a 26% increase compared to 2018).
• $15,000 in investments if the budget would allow it, allocated as follows:
  • $5K – New signage.
  • $5K – Painting and renovating the practice.
  • $2.5K – Developing a new, effective website.
  • $2.5K – Building social media channels, photography, etc.
  •  €75,000 in profit, with €25,000 as my salary.

This would leave me with an almost double margin of repaying my SBA loan and interests which would be around $27,5k per year.

I submitted my business plan to the bank and was called the very next day by their account manager.

He was extremely impressed with my business plan and mentioned that they hadn’t seen such an enthusiastic and detailed plan in a long time.

They were eager to approve my SBA loan.

Note: If I have time, I will put my business plan on my blog too!

As a result, I secured a $125K SBA loan in late summer 2018, with a 5-year term at 5.5% interest. The SBA loan officially started on January 1, 2019, but I managed to negotiate a grace period so that my repayments wouldn’t begin until May 2019. This was crucial for maintaining business’s liquidity, something I initially underestimated but later proved to be an important financial buffer.

With four months left before officially launching my own business on January 1, I focused on preparing as much as possible. My head was already full of ideas on how to improve the practice. I even discussed with the previous owner whether I could start implementing some changes early, to make sure I could start with lead  from day one.

Turning an almost bankrupt business into a profitable one

 

Preparations: September 2018 – December 2018

 

To ensure I started 2019 as prepared as possible as the new owner of the practice, I had four months to make preparations and implement some early improvements.

In consultation with the current owner, I asked if I could start working evenings and weekends at the practice. At first, he hesitated because these were hours when, in the beginning, there wouldn’t be many patients. This meant he would have to pay me an hourly wage, which would even further reduce his profits.

However, I was determined to start with the new opening hours before 2019 so that by the time I officially took over, those extra hours would already be partially filled with new patients. To convince him, I offered to work those hours for free, allowing him to keep all the revenue from the patients who did come.

This created a sense of goodwill between us, which gradually gave me more freedom to start implementing changes within the practice even though it technically wasn’t mine yet.

Meanwhile, I also set up Facebook and Instagram profiles and began following people in the local area. Within two months, I had already gathered 500 followers on both platforms.

I also launched a newsletter using email addresses collected from the existing patient administration system. In the newsletter, I informed everyone about the new “appointment within 24 hours” guarantee and announced our extended opening hours on Tuesday and Thursday evenings, as well as weekends.

Next, I created a Google Business Profile so that we could be easily found on Google Maps. I also began collecting reviews from existing patients. Our biggest competitor had only 38 reviews, and I set a goal to surpass that before January 1, 2019—and I did. By January 1, I had gathered 52 reviews, strengthening the social proof of the practice.

At the same time, I was negotiating all the cost-saving contracts mentioned earlier. This meant that from January 1 onward, the lower costs would immediately take effect, allowing me to benefit from all the savings right away.

The new website was also being finished, ready to go live on January 1. The online booking button and WhatsApp feature were tested to avoid any surprises when we launched.

I am 100% sure that all these preparations saved me from almost going bankrupt in the first months of 2019.

Want to know how 2019 went? Keep reading.  (Insert link article here)

Here are 6 key takeaways summarizing your blog post:

1️⃣ Buying an Existing Business Can Be Smarter Than Starting from Scratch

Instead of starting a business from zero, acquiring a struggling but established company gave me instant access to a client base, an existing location, and operational systems. Even though the business was failing, I saw the potential for a turnaround with the right improvements.

2️⃣ Always Factor in Startup Costs & Early Expenses in Your Business plan.

A major lesson I learned is that when taking out an SBA loan, it’s crucial to factor in your startup costs and initial months of expenses. Running out of cash in the first months can cripple a business. It’s better to take a slightly larger loan upfront to ensure liquidity.

3️⃣ Cutting Hidden Expenses Can Instantly Boost Profitability

By eliminating unnecessary expenses (like an overpriced accountant, expensive marketing with no ROI, and high rent costs), I immediately improved the business’s financial health, just by renegotiating contracts and being smarter with spending.

4️⃣ Your Business Needs a Unique Selling Proposition (USP) to Stand Out

To compete with other businesses, I introduced a strong USP: “Always an appointment within 24 hours.” While other clinics had long waitlists, I positioned my business as the fastest and most accessible option helping me attract more customers immediately. 

5️⃣ Digital Marketing & Online Booking Transformed My Business

The old business had zero online presence. No social media, outdated website, and no easy way for customers to book appointments. By building a new website, launching social media, and running targeted ads, I quickly grew brand awareness and customer bookings.

6️⃣ A Well-Prepared Business Plan Increases Your Chances of Getting a SBA Loan

When applying for my SBA loan, I didn’t just show enthusiasm—I presented a well-researched business plan with a clear breakdown of cost reductions and revenue growth strategies that would improve the business’s profitability. This convinced the bank to approve my loan, even though I had almost no personal funds or collateral.