For this week’s Invested in Us, I wanted to spend some time talking about the state of the capital markets, but from a slightly different angle.
Most of the financial media focuses on public markets: where the S&P 500 is trading, what the Federal Reserve is going to do next, whether rates are coming down, and what the latest inflation number means. All of that matters, and we’ll touch on it, but there is another capital market operating underneath all of this that I think gets far less attention: the market for privately owned American businesses.
There are thousands of businesses across the country that have been around for 10, 20, or 30 years, generate real cash flow, employ people, and in some cases even own the real estate they operate out of. Eventually, the owners of those businesses have to sell.
That creates opportunity.
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State of Capital
The Federal Reserve is still operating in a higher-rate environment, with the federal funds target range currently at 3.50%–3.75%.[1] What that really means in plain English is that borrowing money is no longer “cheap and easy” the way it was a few years ago. Capital has a real cost again, and that changes how deals get done.
Inflation has also remained above the Fed’s long-term 2% target, so the cost of capital is still something investors have to take seriously.[2]
I don’t necessarily think that’s a bad thing.
For most of my career, I’ve looked at investments through the lens of institutional investors, and one of the first things you learn is that the price and structure of your capital matter. When capital is extremely cheap, it can hide a lot of mistakes. When capital gets more expensive, you have to pay closer attention to what you’re actually buying, how much cash flow it generates, and whether that cash flow can comfortably support the debt.
That applies whether you’re underwriting a billion-dollar real estate portfolio or a $2 million business in your hometown.
The numbers still have to work.
The Breakdown
That brings me to what I discussed on this week’s episode: SBA financing.
The SBA 7a program is basically a way for banks to make loans to small business buyers with a government guarantee behind a portion of the risk. In practice, it’s one of the most common ways people finance the purchase of an existing business, and in some cases, the real estate tied to it as well.
What matters here isn’t the technical structure - it’s what it enables.
Under the right setup, an entrepreneur can acquire an existing business with a relatively small equity injection, often around 10%, depending on the deal and lender.[4] And in some cases, if the business owns the building it operates from, that real estate can be included in the same financing structure.
So instead of starting from scratch, you’re stepping into something that already exists.
You’re not just buying a building and hoping someone rents it. You’re buying a business that already has customers, employees, revenue, and cash flow—and the real estate underneath it.
That’s a very different investment proposition.
Property Playbook
This is where real estate and private business ownership start to intersect.
International markets have also reminded investors why diversification matters. Emerging-market stocks have outperformed many U.S. and European benchmarks this year, showing once again that the United States will not lead every market cycle.[3]
That does not mean investors should abandon American companies and move everything overseas. It means we should be careful about building portfolios around the assumption that whatever performed best over the last several years will automatically remain the winner forever.
The mistake people make is thinking the goal is to find something cheap enough to buy.
That’s not the goal.
The goal is to find something good enough that you actually want to own it.
I would much rather start with a business that already has real demand, real customers, and a track record of producing cash flow, and then focus on how to improve it from there.
Maybe that’s better marketing. Maybe it’s adding services. Maybe it’s expanding into a new location or acquiring a smaller competitor. There are a lot of ways to create value, but they all start with something that already works.
Because leverage doesn’t rescue a bad business. It amplifies whatever you already have.
And if you get it right, something powerful happens over time: you’re paying down debt while potentially growing earnings at the same time. The liability shrinks while the asset becomes more valuable.
That’s the play.
Policy & Economics
There’s also a bigger picture here.
There are more than 36 million small businesses in the United States, and they make up almost the entire backbone of the economy.[5] Behind that number are millions of owners who eventually face the same question: what happens to the business they spent their life building?
Some pass it to family. Some wind it down. Some sell to competitors. And a growing number sell to the next generation of entrepreneurs who want to take it over and build on it.
And that’s where SBA financing actually plays a quiet but important role.
Think about it like this: one owner builds a business over 20 or 30 years, creates jobs, serves customers, and eventually sells it—often creating a life-changing liquidity event for themselves. Then a new owner steps in, finances the acquisition, and continues operating it for the next 20 or 30 years.
That cycle keeps repeating.
Behind the scenes, banks originate these loans, and many of them are later packaged and sold to bond investors. That spreads the risk across the system, gives banks the ability to make more loans, and allows capital to keep flowing back into small business ownership.
It’s not flashy, but it’s a system that quietly keeps the economy moving.
The seller gets liquidity. The buyer gets ownership. Employees keep their jobs. Customers keep their service. And capital keeps recycling through the system.
To me, that’s capitalism working the way it’s supposed to work.
The Conversation
I keep coming back to something I’ve said throughout Invested in Us: creating wealth is not complicated, but that doesn’t mean it’s easy. It’s data, not vibes.
There is a difference.
At the core, you’re trying to own productive assets, generate cash flow, reinvest intelligently, and let time do part of the work. Real estate can do it. Businesses can do it. Public markets can do it. The structure changes, but the principle doesn’t.
In the example we talked about today, you might acquire a business using SBA financing, put a relatively small amount of equity down, and let the business itself generate the cash flow to service the debt. Every payment increases your ownership. If you grow the earnings while you own it, you’re also increasing what someone else would eventually pay for it.
And then, one day, you sell it.
That’s the liquidity event.
On paper, it sounds simple. In reality, it takes discipline, good partners, access to capital, thoughtful underwriting, and a little bit of timing going your way. But the foundation hasn’t changed.
Own productive assets. Take care of them. Grow the cash flow. Pay down the debt. Give yourself time.
Hopefully this week’s episode gives you something to think about, especially if you’ve always assumed business ownership or commercial real estate was only for people who were already wealthy.
As always, thank you for reading and following along with Invested in Us. If you found this helpful, share it, like it, or repost it, and follow along on social media.
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