Some common funding sources present unique challenges, though life insurance may be a good solution.

Personal Funds of Owners: Most business people do not keep large sums of liquid assets that would be needed to purchase the deceased owner’s interest. Most money would be in their businesses.
Sinking Fund: The premature death of an owner may not give the business time needed to accumulate the purchase price.
Borrowed Fund: A bank may not be willing to lend money to a business that has recently lost an owner or the cost of the interest of the loan may be excessive.
Installment Payments: The heirs of the deceased owner may not get the sum or money needed to settle death costs and there is no guarantee future payments will be received if the business fails.
Life Insurance: There are many advantages life insurance offers that the other alternatives do not. Life insurance annual premiums are often a small fraction of the death benefit.
Death benefits are available when needed, regardless of when the owner dies.
Death benefits are generally federal income tax-free.