The Entrepreneur’s Biggest Decision: Buy or Build?
Every aspiring business owner faces the same fork in the road: do you start a business from scratch, or do you buy one that already exists? It’s one of the most consequential financial decisions you’ll ever make — and most people get it wrong because they don’t have the full picture.
The romantic narrative says “build something from nothing.” Silicon Valley glorifies the garage startup. But the data tells a very different story. Buying an existing business is statistically safer, financially smarter, and gets you to profitability faster than starting from scratch — especially when SBA financing makes acquisition accessible with as little as 10% down.
At GoSBA Loans, we’ve helped hundreds of entrepreneurs navigate this decision. With $320M+ funded in 2025 through our network of 50+ lenders, we’ve seen the outcomes firsthand. And we offer our service completely free — including a professional business plan and financial projections valued at $2,500–$5,000.
Let’s break down the comparison across every dimension that matters.
Revenue From Day One vs. Years of Building
This is the single biggest advantage of buying an existing business, and it cannot be overstated.
Buying an Existing Business
- Revenue starts on Day 1. Customers are already calling, orders are already coming in, and cash is already flowing.
- Employees are already trained and delivering the product or service.
- Supplier relationships exist — you don’t need to negotiate terms from zero.
- Systems and processes are in place — from invoicing to operations to customer management.
Starting From Scratch
- Revenue starts at $0. Every single customer must be found and won.
- Average time to profitability: 2–3 years for most small businesses.
- You’re building everything simultaneously — product/service delivery, marketing, sales, operations, hiring.
- Cash burn is constant — rent, payroll, marketing, insurance — all flowing out with little or nothing flowing in.
Consider the numbers: if you buy a business doing $1 million in annual revenue with $300,000 in owner earnings, you’re making money from the moment you sign the closing documents. A startup generating the same revenue might take 3–5 years and $200,000–$500,000 in invested capital to reach that point — with no guarantee it ever will.
Cash Flow and SBA Loan Payments: The Self-Funding Advantage
One of the most powerful aspects of buying a business with an SBA loan is that the business pays for itself.
How the Math Works
Let’s say you buy a business for $1.5 million with an SBA 7(a) loan:
- Down payment: $150,000 (10%)
- Loan amount: $1,350,000
- Interest rate: Prime + 2.75% (approximately 10.25% in current market)
- Monthly payment: ~$18,200 over 10 years
- Annual debt service: ~$218,400
If the business generates $400,000 in annual SDE (Seller’s Discretionary Earnings), after your loan payment of $218,400, you’re left with approximately $181,600 in annual owner income — from Day 1. That’s a 1.83x debt service coverage ratio, which is healthy and gives you a comfortable margin.
The Startup Alternative
With a startup, there are no earnings to cover loan payments. You’re funding operations from personal savings or investment. Every dollar going out is a dollar you may never see again. Most startup SBA loans (when you can even get one) require you to demonstrate an alternative repayment source because the business doesn’t have cash flow yet.
Proven Business Model vs. Unproven Concept
When you buy an existing business, you’re buying proof.
What “Proven” Means in Practice
- The product/service works — customers have been buying it for years
- The pricing model works — you know what the market will bear
- The location works — foot traffic, demographics, and accessibility are established
- The marketing channels work — you know where customers come from
- The cost structure works — you have years of data on expenses and margins
Startup Reality Check
With a startup, everything is an assumption:
- “I think customers will want this” — maybe, maybe not
- “I think I can charge this price” — the market will decide
- “I think this location will work” — hard to know until you try
- “I think my cost structure will support profitability” — projections are educated guesses at best
The difference between “I know” and “I think” is the difference between buying and starting. With an acquisition, you have 2–3 years of tax returns, financial statements, and customer data to base your decision on. With a startup, you have a spreadsheet full of hope.
Risk Comparison: The Numbers Don’t Lie
This is where the comparison becomes most stark — and most important.
Startup Failure Rates
- 20% of startups fail in the first year
- 50% fail within five years
- 65% fail within ten years
- Only about 25% of startups make it to 15 years
SBA Acquisition Default Rates
- SBA 7(a) loans for business acquisitions have default rates of approximately 15–20% over the life of the loan
- When the acquisition is properly structured with adequate cash flow coverage, default rates drop to under 10%
- Acquisitions with experienced operators and strong DSCR default at even lower rates
The contrast is dramatic. A startup has roughly a coin-flip chance of surviving five years. An SBA-financed acquisition, properly vetted and structured, has an 80–90% chance of success. If you’re putting your life savings on the line, these odds matter enormously.
Why SBA Lenders Prefer Acquisitions Over Startups
If you’ve ever tried to get an SBA loan for a startup, you know it’s significantly harder than getting one for an acquisition. Here’s why lenders feel that way:
For Acquisitions, Lenders Can Underwrite Real Data
- Historical financial statements prove the business generates revenue and profit
- Tax returns verify reported income
- Customer lists and contracts demonstrate revenue durability
- Tangible assets (equipment, inventory, real estate) provide collateral
- Goodwill and going-concern value are established by market track record
For Startups, Lenders Are Guessing
- No historical financials — only projections, which are inherently unreliable
- No proven customer demand — just the founder’s belief that demand exists
- Limited collateral — startups often have few tangible assets
- Higher underwriting burden — lenders must rely heavily on the borrower’s personal credit, experience, and alternative repayment sources
Many SBA lenders simply won’t fund startups at all. Those that do require significantly more documentation, higher down payments (sometimes 20–30%), and stronger personal guarantees. The approval process is longer and the terms are often less favorable.
Cost Comparison: Real Numbers
Let’s compare the total cost of reaching $1 million in annual revenue through each path:
Buying a $1M Revenue Business
- Purchase price: $800,000–$1.2M (2–3x SDE of $300–400K)
- Down payment: $80,000–$120,000 (10%)
- Closing costs: $15,000–$25,000
- Working capital reserve: $25,000–$50,000
- Total out-of-pocket: $120,000–$195,000
- Time to $1M revenue: Day 1
- Risk: Low — buying proven cash flow
Starting a Business to Reach $1M Revenue
- Initial setup costs: $50,000–$150,000 (depending on industry)
- Operating losses (Year 1): $100,000–$200,000
- Operating losses (Year 2): $50,000–$100,000
- Marketing to acquire customers: $50,000–$150,000
- Working capital needs: $50,000–$100,000
- Opportunity cost (lost salary): $150,000–$300,000 over 3 years
- Total investment: $450,000–$1,000,000
- Time to $1M revenue: 3–5 years (if ever)
- Risk: High — 50% failure rate within 5 years
The acquisition path costs less money, less time, and carries less risk. When you factor in the opportunity cost of 3–5 years of your life and the emotional toll of startup uncertainty, the comparison isn’t even close.
When Starting From Scratch Actually Makes Sense
In fairness, there are scenarios where starting a new business is the better choice:
- You’re creating something truly new — a product or service that doesn’t exist yet in your market
- Your industry has no acquisition targets — no existing businesses for sale in your space
- You have a massive competitive advantage — proprietary technology, exclusive relationships, or unique expertise that can’t be replicated through acquisition
- Capital constraints: You genuinely don’t have the 10% down payment required for an acquisition (though this is often less than startup costs)
- You want to build a specific culture from Day 1 without inheriting existing employees and practices
For most people in most industries, however, buying beats building.
The Hybrid Approach: Buy Then Build
The smartest entrepreneurs often use a hybrid approach: buy an existing business as your foundation, then build on top of it. This gives you:
- Immediate cash flow from the acquisition to fund growth initiatives
- An established customer base to cross-sell new products or services
- Existing infrastructure (staff, systems, location) that you can leverage for expansion
- Credibility in the market that a startup simply doesn’t have
Many of our most successful clients at GoSBA bought their first business with an SBA loan, then used the platform to launch new service lines, expand into adjacent markets, or acquire additional competitors.
How GoSBA Loans Makes Business Acquisition Accessible
If you’re convinced that buying beats building (as most smart entrepreneurs are), the next question is how to get financing. That’s where GoSBA comes in:
- 50+ lender network: We match your deal to the lender most likely to approve it — based on industry, deal size, your experience, and dozens of other factors
- $320M+ funded in 2025: Our track record of successful placements means lenders trust our deals and borrowers
- 100% free service: We’re paid by the lender, not by you. You pay nothing for our expertise and guidance.
- Free business plan & projections: Every client receives a professional business plan and financial projections — a $2,500–$5,000 value — at no charge. This is often the difference between approval and denial.
- Expert guidance: From deal evaluation to closing, we walk you through every step of the SBA acquisition process
Ready to Buy a Business Instead of Starting One? Let’s Talk.
The data is clear. The math works. The risk profile is dramatically better. If you’re an aspiring business owner, buying an existing business with an SBA loan is the smartest path to entrepreneurship.
Whether you’ve already found a business to buy or you’re just starting to explore the idea, a conversation with our team will give you clarity on your options, your financing potential, and your next steps.
👉 Schedule Your Free Consultation with GoSBA Loans
No cost. No obligation. Just honest guidance from a team that has helped fund over $320 million in SBA acquisitions in 2025. Let us show you a smarter path to business ownership.
