After you’ve decided on the type of business you want to buy, it’s time to consider the various sources of finance available to you. As a general rule, we recommend that buyers look to identify and research the financing available to them before starting to view potential businesses.
Generally, banks are more open to lending money to people acquiring an existing business with a successful trading history. With the current growth of the UK economy and the stream of government initiatives to boost small business lending, banks are starting to demonstrate increasing confidence in small businesses.
At Intelligent Business Transfer, around half of our buyers borrow money from their bank to help fund the purchase of a business. 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.
In order to successfully secure a loan you will need to prepare a comprehensive business plan detailing information about the company you are looking to purchase, as well as 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.
If you’ve had an offer accepted on one of our businesses for sale, 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.
To make sure you’re as prepared as possible, you can assist your application by preparing the following:
We recommend following the below points in order to improve your chances of securing a bank loan for a business purchase: