Buyer Finance: Securing a Bank Loan

After you’ve decided on the business or type of business you want to buy, it’s time to consider the various sources of finance available to you.

One thing is for sure:

If you're looking to buy a business, you're going to need a way to finance the transaction.

As a general rule, we recommend that buyers look to identify and research the financial options available to them before starting to view potential acquisitions.

We'd like to help you with that, so that you are more equipped to begin making serious enquiries into businesses.

In this guide, we will highlight one of the most common ways you can secure your finances in order to buy the business that is perfect for you:

A bank loan.

Bank Loan to Buy a Business

When it comes to securing a loan with a bank, there are a few things to be aware of.

Generally, banks are more open to lending money to people acquiring an existing business with a successful trading history. 

Makes sense, right? They want to know if the money they are lending away will be spent in a way that ensures a return for them.

Intelligent working in partnership with NatwestNatwest logo

With the recent stream of government initiatives to boost small business lending and the general support they are receiving, banks are starting to demonstrate increasing confidence in small businesses.

This means that if you can show that your chosen small business is going to be able to perform, you're more likely to get the backing of the bank through a loan.

At Intelligent, we're seeing that around half of our buyers borrow money from their banks to help fund the purchase of a business. 

Now, a very common question, one you might be asking yourself: 

How much money will I be able to loan from the bank?

Typically, banks will contribute 50% to 70% of the total purchase price, with the remaining balance expected to be made up in cash by the buyer. 

Close to 100% commercial or business mortgages may be available for buyers purchasing freehold and leasehold businesses in certain circumstances, but additional security would be required.

But there's more:

In order to successfully secure a loan you will need to do the following:

  1. Prepare a comprehensive business plan detailing information about the company you are looking to purchase.
  2. Prepare and present information about your experience, skills and financial history.

Additionally, it’s possible to negotiate deferred payment deals - whereby buyers pay a lump on completion of the business sale, followed by monthly instalments thereafter. 

This is a very innovative way of funding where the business’ accounts are weaker.

Funding for Intelligent Members

If you’ve had an offer accepted on one of our businesses for sale, first of all: congratulations!

To assist you further, we have a network of potential lenders we’d be happy to refer you to. 

Whether you are an experienced operator or a first-time business buyer, we’ll do our best to connect you with the right lenders to provide you with the best funding options to suit your situation.

And what's more:

To make sure you’re as prepared as possible, you can assist your application for a bank loan by preparing the following:

  • Additional security such as equity in your home

  • Significant deposit of +20%

  • Comprehensive business plan

  • Demonstrate relevant business experience

How to prepare for securing a bank loan?

Securing a bank loan is not something to take lightly.

The purchase of your chosen business might depend on it and as such, you don't want to leave anything to chance.

We recommend following the below points in order to improve your chances of securing a bank loan for a business purchase:

  • Do your homework: Ensure that you are fully versed in the company’s accounts. You will need to have access to the company’s audited accounts for three years.

  • Prepare a business plan: Although you don’t need to provide an exhaustive plan at this stage, you should cover the crucial details of why you are buying the business, how you will operate the business and how you plan to grow the business.

  • Prepare your cash deposit: To really improve your chances of securing a bank loan you should be planning to put down a payment of 15 to 30% of the agreed selling price. This demonstrates your commitment to the opportunity and is more likely to give your lender confidence in the transaction.

Haven’t found the perfect business for you yet? Please take a look at the businesses we currently have available for sale. Or search for your next purchase in the search bar below.

Not quite ready to make your purchase yet? No worry.

Perhaps our buying guides will help you prepare even more for when you are ready to buy the business that is perfect for you.

Find The Perfect Business…

923 available