Shobhit . . .
So if you want to buy a home in most places in the US, it's oddly easier to get a loan to purchase an apartment building than it is to get a loan to purchase a free standing house, even though the apartment building costs a great deal more.
Because the bank looks at the transaction and says "rents will be paying for the purchase". So they look at the value of the property, the rents its already earning, etc. So in effect the buyer is only part of the equations. If the property will cost 2M, and the rents cover 1.5M, the owner is really responsible for .5M. Where as if they were purchasing a 1M house or a 2M house (no rents) the bank would laugh outloud.
So a startup business owner who buys a business simply has to find a business that is earning enough money to cover the cost of the loan, running the business, and their salary (which is usually a cost the business is already paying to the current owner).
Ex: If I want to start an app that sells car repair services (kind of like uber for car repair shops), I might be better off purchasing a car repair shop . . . and then treating app development as a marketing expense . . .
Because I can get probably get $1M-$2.5M funding directly from the SBA for the car repair shop if its got a good customer base, and good staff, and owns its own lot. It probably is paying it's owner $5K-$10K a month, and it probably has an advertising budget of $5K-$10K I can put into an app.
From an investor perspective, after the sale, I can see . . . 1) this company has customers 2) it has assets 3) it has a business it can use to test it's app . . .
In effect the app company has bootstrapped its business with an SBA loan.
To purchase that business, founders don't need a lot of cash up front, and if they do need cash they can go to the same investors they are currently approaching to say "look, do you want to invest $100K-$200K in a business that already has revenues, that already has property, and will be developing this app". From their point of view, this is now a very non-risky venture. They just have to trust you not to tank the car repair business . . . which was running well enough the SBA would give you a loan when you bought it.
In effect the SBA has rubber stamped you and provided 2.5M in funding so you can execute this plan.
And the SBA is totally fine with you improving an existing business. A tech that buys a car repair place is clearly going to leverage their technical skill to create a marketing advantage. They'll use that advantage to expand revenues . . .