Q: I own a heating and air-conditioning company that has grown to a roughly $6 million-a-year business in just a few years. I feel there is a real opportunity in today's slow economy to purchase a direct competitor. I would like to raise money through equity or debt to do this. But I understand that most of the private-equity or venture firms are looking mostly to invest in tech or biotech. How can a business like mine raise money? —C.S., Vero Beach, Fla.

A: You're right that there are opportunities now to scoop up businesses at attractive prices. But you don't want to compromise your current successful operation by overleveraging yourself. We don't know whether today's economic downturn will last one year, three years or even longer, but you should prepare for the worst.

Before buying another business, carefully assess whether you would still have an ample cash cushion with your current company to survive a potentially long downturn in business — and whether the business you're looking to buy can realistically generate enough cash flow to pay off any financial obligation you incur from the purchase, advises William Payne, an angel investor in Las Vegas.

"The last thing he wants to do," Mr. Payne says, "is take a perfectly good business and acquire a poorly operated competitor, which then takes the whole thing down."
If you decide to make a purchase, raising the money in today's tight credit environment will be difficult. Banks aren't lending money as freely as before. And, as you mentioned and Mr. Payne agrees, angel-investor networks and venture capitalists tend to invest in fast-growth industries like biotech.

A practical strategy is to join local and national trade groups and network with other entrepreneurs in your sector and similar industries who may be looking for strategic partnerships and are willing to put up some money, says Lawrence Gelburd, an entrepreneurship lecturer at the University of Pennsylvania's Wharton School in Philadelphia.

For instance, a plumbing-installation business, a commercial real-estate developer or another heating and air-conditioning business might want to form an alliance so they can package your heating and air-conditioning services with their own, says Mr. Gelburd.

Also consider joining groups such as the American Society of Heating, Refrigerating and Air-Conditioning Engineers and attending and speaking at conferences, since these are likely places to meet such potential partners.

Another option: seller financing. Instead of paying for a business outright, you could strike a deal with the seller to make a down payment and then pay off the balance in installments, It can be win-win deal: You don't need to come up with all the cash right away and the seller scores a buyer.

You also might turn to an investment banker or a business broker who specializes in your industry. But that may be a long shot. Many investment bankers handle only deals of $50 million or more, and brokers aren't always best equipped to find investors.

Write to Kelly Spors at kelly.spors@wsj.com