How do I apply for a loan to buy another business?

2 min read

Target assessedNot just you

Due diligenceDeeper

SecurityOften required

WeeksLonger timeline

A more involved application

Buying a business means the lender assesses two things: your capacity and the target company's. They want confidence that the acquired business generates enough to service the debt, so expect closer scrutiny of the target's accounts, customers and cash flow — real due diligence on both sides. This is a larger, longer application than a working-capital loan.

What lenders look for

A credible deal shows the target's earnings covering the repayments, a sensible purchase price, and a clear plan for running it. Lenders often want security and, given the size, a personal guarantee. A strong business plan and forecast for the combined entity are essential, not optional.

Preparing and timing it

Allow weeks, not days, and get advice — acquisition finance is specialist. Size the requirement, including working capital for the transition, on the funding-requirement calculator, and model the repayment against the target's earnings on the affordability calculator. Then enquire for a business loan and expect a structured process.

Frequently asked questions

Can I borrow the full purchase price of a business?

Rarely the full amount — lenders usually expect the buyer to contribute and will lend a proportion against the target's earnings and any security. The exact split depends on the deal, the sector and the strength of both businesses.

How long does acquisition finance take?

Longer than an ordinary loan — typically several weeks — because of due diligence on the target, valuation, security and legal work. Start early and line up professional advice, as these deals are structured and document-heavy.