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There are of course hundreds of different types of businesses to buy and there are thousands on the marketplace in the UK and even more throughout the world. When trying to raise finance to buy a business, the funders will always ask if your experience and background is relevant to the business you want to purchase. It makes sense to buy a business which you can run.


Do you buy a franchise; an existing business; licensed business; an invention with the scope to earn money, and of course how do you raise finance in the first place?


OK, so you want to buy a business? Well we have many years of experience helping people to identify and buy a wide range of businesses.


Like everything in life you tend to reap what you sow, so to speak. It is really important to conduct as much research as possible on the type of business you want to buy; the location; the size in terms of turnover; whether you want bricks and mortar as part of the purchase; how much goodwill do you want to pay for and of course what will be the idea regarding the purchase price?

Based upon our experience, the main thing to quote is the famous phrase “buyer beware” or in Latin “caveat emptor”. It is definitely wise to adopt a healthy sceptical attitude when buying any business. Additionally, seeking professional advice when buying a business is very important. If you don’t seek professional advice because you feel the cost is prohibitive, you may well regret that decision. Conducting thorough due diligence when buying a business is probably the most important aspect to consider. There are thousands of questions to be asked when you buy a business, all as part of the due diligence process.

Buying a Business - a Guide

Raising finance for an acquisition

Smart business purchasers will usually try to leverage their acquisition as the first priority. In other words, they will try and acquire the majority, controlling share in the company by paying as little as possible from their own pocket.

It has to be said that many experienced purchasers of businesses are not always actively looking to make a particular acquisition. Often they are generally on the lookout for a deal where the company is reasonably priced and can offer a predictable high rate of return on investment.

Commercial loans are usually one of the most effective methods of buying an existing business. Rates are often competitive and payment schedules can be quite flexible. Lenders can pay up to 75% of the purchase price with repayments spread up to 20 years, though at this level business loan collateral must usually be offered.


There are other sources of finance that can be used in conjunction with or in place of commercial loans. A smart business purchaser will need a certain level of creativity, resourcefulness and lateral thinking.

Here are the some of the main areas of creative business purchase funding you can investigate.


Personal funds and borrowings
  • Personal cash savings

  • Loans from family and friends

  • Sell personal shares or other investments

  • Take advantage of the numerous credit card deals that offer 0% balance transfers and free credit periods.

  • Obtain a secured loan from bank / building society / finance company (up to £250k)

  • Trade or barter third party part-ownership of personal assets for share of new business

Find Business Partners
  • First look at the existing owner of the business. Rigorously hound the buyer to retain a minority equity stake.

  • Persuade a new partner to give you funds in return for an equity stake.

  • Talk to employees of the target business - offer them the opportunity to own part of the business.

  • Approach suppliers and customers of the target company and offer them a stake.

Search for more sources of funding
  • Negotiate to reduce the up-front cash amount payable for the business and extend the earn-out amount or period.

  • Take out or increase the target company's bank loan.

  • Take out or increase your own company's bank loan.

  • Look at asset lending for the business.

  • Address short-term cash shortage with a mezzanine finance deal

  • Does the company have surplus or obsolete stock? If so, look at selling it off.

  • Does the company have assets that are underutilised or not used at all? Sell them off.

  • If the company has high value assets or equipment, sell them and lease them back.

  • Speed up company receivables.

  • Look at factoring as an option to release cash.

  • Approach a business list broker and rent out prospect and customer lists to non-competing 3rd parties.

  • Ask for deposit payments against existing customer orders.

  • Are the business premises too large? If so, consider subletting or selling unused buildings/floors/rooms/desks or other space.

  • Let or sell on-premise concession space.

  • Let or sell any unused parking spaces.

  • Are any trademarks sitting idle that could be sold on or granted as licences?

Deal and Finance Structuring
  • Try and obtain financing from the vendor.

  • Postpone the initial business purchase payment for as long as possible.

  • Assume additional liabilities not mentioned previously by the seller.

  • Approach company suppliers and negotiate longer payment terms with major suppliers.

  • Change inventory procedures to consignment terms.

  • Offer a discount to debtors if they pay up immediately.

  • Add in all professional fees to the financing deal.

  • Leave the debtor's ledger to the vendor.

There is no argument that negotiating finance and deal terms can be an arduous and time-consuming process. However, it can make all the difference in securing the business and reduces the personal risk onus and to the purchaser. It is very satisfying when the business performs over the following few years and justifies the level of financial risk inherent in the initial leverage

Buy an existing business – the steps

An organised approach will help you find and acquire the right business.


1. Get professional advice

Professional help is invaluable as you go through the negotiation, valuation and purchase process. See our guides choose and work with a solicitor and choose and work with an accountant. You can also access advice on buying a business through a business transfer agent.


2. Research

Research the sector you're interested in, including the best time to buy, and shortlist two or three businesses. The Business Exchange (TBX) also offer a unique Business Acquisition Search Service to help you find the business you are looking for - Click Here to see our Business Acquisition Search Services Page to learn more about how we can help you in this area.

3. Initial viewing and valuation

Be discreet - the owner may not want staff to know they are selling, but be thorough and record key findings.


4. Arrange finance

Lenders generally require:

  • details of the business/sales particulars

  • accounts for the last three years

  • financial projections - if no accounts are available

  • details of your personal assets and liabilities


There are several possible sources of finance you could consider. For specific advice, see bank finance, financing from friends and family and equity finance.


5. Make a formal offer

If you make your initial offer by phone, follow this up in writing. Head your letter subject to contract and without prejudice - and include this phrase in all written communication.

6. Negotiation


Before completing the sale, it may be worth trying to negotiate an overlap period so you have time to become familiar with the business before taking over.


You and your lawyer need to verify the information you have based your offer on. Conduct your due diligence on the target business.


If you're buying premises, you may want to arrange an independent survey and valuation, even if a lender is also carrying out their own survey and valuation at your expense. Find a surveyor who specialises in commercial property.

7. Completion

Even after you reach an agreement on the price and terms of sale, the deal could still fall through. You have to meet certain conditions of sale to complete, including:

  • verification of financial statements

  • transfer of leases

  • transfer of contracts/licences

  • transfer of finance

  • transfer of existing or new VAT registration


If you want to buy a business, please contact us


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