Business acquisition finance can help fund the purchase of an existing business, a management buy-out or the acquisition of selected business assets. The right structure depends on the price, your contribution, the target company’s cash flow and the security available. TMS Finance is a commercial finance broker based in Stockport, supporting buyers across the UK.
A purchase needs more than a loan for the agreed price. Build professional fees, existing debt settlement and enough cash for the first months of trading into your funding plan. Approval, cost and completion timing depend on the lender and the individual transaction.
Ways to finance a business purchase
A business acquisition may use one facility or a combination of funding sources. Each source must fit the transaction and leave the business able to meet its ongoing costs.
- Business loans: a term loan may support part of the purchase where the lender is satisfied with affordability, the buyer’s experience and the proposed security. See our business loan options.
- Asset-based lending: funding secured against eligible business assets may be relevant. The value available depends on lender valuations, existing charges, ownership and the legal structure of the purchase. It is not the same as assuming every asset can fund the deal.
- Asset finance or refinance: equipment and vehicle facilities may support the assets involved in a purchase or release capital from eligible assets already owned. Explore asset finance.
- Invoice finance: eligible unpaid business invoices may support working capital after completion. It does not automatically provide the money to pay the seller. See invoice finance.
- Buyer equity and seller arrangements: your contribution, deferred consideration or a seller loan may form part of the package. These need agreement with the seller, lender and legal advisers.
For a closer look at share purchases, asset purchases and combined funding, read our guide to acquisition deal structures.
What a lender will need to assess
Requirements vary, but preparing the following helps establish whether your purchase is fundable:
- The target business, agreed or proposed price, and whether you are buying shares or assets.
- Your own contribution, the amount you want to borrow and the proposed completion date.
- Recent accounts, up-to-date management information and trading details for the target and any existing buying business.
- A cash-flow forecast showing repayments, wages, suppliers, tax and realistic working-capital needs after completion.
- Your experience, the management handover plan and any major customer or supplier dependencies.
- Details of existing borrowing, assets, charges and any proposed security.
- Heads of terms and relevant legal or valuation information as these become available.
Costs, security and personal guarantees
Compare the total repayment amount alongside the monthly payment. Ask about interest, arrangement and broker fees, legal and valuation costs, early repayment terms and any ongoing facility charges. A lower monthly payment over a longer term can increase the overall cost.
Security and personal guarantees depend on the lender and facility. A guarantee can expose you personally if the business cannot pay, and pledged assets may be at risk. Take independent legal advice before signing. The availability of finance does not replace commercial, legal or tax due diligence on the business you are buying.
How TMS Finance can help
We start with the purchase, the funding gap and the business’s ability to repay. We can help organise the information and discuss options with relevant lenders. A lender’s indication is subject to its assessment and conditions; it is not a promise that the acquisition will complete.
If the purchase depends on uncertain growth, leaves too little working capital or creates repayments the business cannot sustain, revisit the price or structure before committing. Complex acquisitions can take weeks or months, particularly where valuations, multiple facilities or legal work are needed.
Common acquisition finance questions
Can finance cover a management buy-out?
It may be available, subject to the company’s performance, the team’s experience, their contribution and the lender’s criteria. An existing management role alone does not guarantee approval.
Can I borrow the full purchase price?
There is no universal funding percentage. The lender will consider the structure, contribution, security and affordability. Do not assume that the purchase can be funded entirely with debt.
Can fees and working capital be included?
Some facilities may allow this, but confirm what is eligible with the lender. Budget separately for costs that are excluded and for cash needed after completion.
Discuss finance to buy a business
Tell us what you are buying, the price, your contribution and your timescale. Discuss funding for my business purchase, or use our acquisition funding support guide to prepare your information.