Education

How to get a loan to buy an existing business

30 May 2022

When starting a business, we usually think about building one from scratch. But there are plenty of benefits to buying an existing business from someone who wants to sell. With the right experience, you might be able to purchase one with a business loan.

Business Acquisition Hero

If you’re looking to acquire a business and don’t have the upfront capital, you're probably wondering whether you can get the funds through a business loan

The answer is yes - if you’re eligible. 

One of the benefits of buying an existing business is that it’ll probably already have a financial history behind it, making it easier for lenders to decide. 

Depending on the business in question, it might also have an established brand, customer base and presence in the market, meaning you won’t have to build everything from the ground up. 

The operational infrastructure - from the staff on the ground to the premises and equipment - might be included in the sale price, so you won’t have to worry about meeting lots of upfront costs. 

In short, buying an established business can be a more risk-averse approach compared with starting a new enterprise. But it’s not always, and every business acquisition comes with its unique challenges and considerations. 

Do you want to buy a profitable brand?

If you’ve got experience in a particular industry, you might be looking to buy a business that has a solid reputation and solid customer base. Perhaps the current owner is retiring and wants to pass the company on to someone knowledgeable. 

Before purchasing a company, it’s essential to do a complete evaluation. 

Consider looking for a qualified solicitor and accountant to help you do your due diligence and conduct a thorough investigation into the company’s reputation. 

Among other things, you can look for mentions of the company on social media. This will give you a more unbiased insight into how it’s perceived instead of just looking at the company’s own social media pages. Check out Trustilot and Glassdoor too. 

Or are you purchasing a business in distress?

Perhaps you’re looking to buy a business in distress.

If this is the case, you’ll need to approach the acquisition with experience, patience and enthusiasm for seeking out opportunities. You’ll have to work hard on rebuilding trust with customers to turn the business around and start making a profit. 

Business finance lenders will want to see evidence of a proven track record and the right mindset and goals. Transforming a failing business into a successful one requires much grit, but it can be an advantageous experience. 

Loan options for a business acquisition

There are many potential lenders and options on the market today that provide funding for business purchases. At Funding Options, we work with over 120+ lenders, and our technology can match budding business owners with suitable options for their needs. 

Here are a few types of business finance to explore:

Secured and unsecured business loans

You could fund your business using a secured or unsecured business loan. If you choose the guaranteed business loan route, you’ll have to offer security in the form of an asset. Security provides the lender with more confidence that they will get their money back because if your business doesn’t repay, the asset is used to recoup the losses. 

Unsecured loans don’t require security. However, because of this, the interest rates can be higher. They’re usually quicker to process, though, as a secured loan involves a valuation of the asset offered as security.

Looking for finance?

Let us help you find the best financial product in the market. We will guide you through the whole process and make sure you get the best deal.

See your Funding Options

Asset Finance

Like a secured loan, asset finance uses your business assets as security for funding. In terms of buying a business, the lender might be able to use assets from the company you’re purchasing and your current business (if you have one) as security. 

Typically, the lender will purchase the assets, and you’ll gradually repurchase them through the agreed monthly repayments. Remember: your assets will be at risk if you don’t meet the repayments.

Looking for finance?

Let us help you find the best financial product in the market. We will guide you through the whole process and make sure you get the best deal.

See your Funding Options

Invoice Finance

You might be able to fund part of your business purchase using invoice finance. Invoice finance lets you borrow money against the business’ future income. Instead of waiting weeks or months to get paid, the lender releases the majority of the funds (usually) within 48 hours of the invoice being issued. 

Looking for finance?

Let us help you find the best financial product in the market. We will guide you through the whole process and make sure you get the best deal.

See your Funding Options

Commercial Mortgages

If you’re looking to buy business premises and the business itself, you might be eligible for a commercial mortgage. Commercial mortgages can typically fund up to 70% of the property value; as this is a long-term funding option, interest rates tend to be lower than those attached to business loans. 

Looking for finance?

Let us help you find the best financial product in the market. We will guide you through the whole process and make sure you get the best deal.

See your Funding Options

Seller financing or crowdfunding

You could buy your future business through seller financing. This is when the seller agrees to take part in the payment over a few months or years. Crowdfunding - when you raise money from many people - is another route.

Looking for finance?

Let us help you find the best financial product in the market. We will guide you through the whole process and make sure you get the best deal.

See your Funding Options

Whatever the industry or size of business, kickstart your business acquisition journey by seeing what business funding you could be eligible for today.

Get Started

Funding Options

Editorial Team

Editorial Team

)))

Subscribe to our newsletter today

Sign up for the best of Funding Options sent straight to your inbox.