Business Funding · 10 min read

How to Finance Buying a Business in the UK

Alex BeardsleyFounder & Director

|Updated July 2026

Buying an established business gets you customers, staff, contracts and cash flow from day one. What it rarely gets you is a seller willing to wait while you save up the purchase price. Almost every acquisition in the UK is funded with a mix of other people's money, and the good news is there's a well-worn playbook for how.

With base rate down at 3.75% and more businesses coming to market as owners retire, 2026 has been a busy year for smaller acquisitions. Here's how the funding actually gets structured.

The Core Idea: the Target Pays for Itself

Acquisition lending is sized on the profits of the business being bought. Lenders look at EBITDA, the earnings before interest, tax, depreciation and amortisation, and ask one question: can this business comfortably service the debt used to buy it?

As a general guide in the UK SME market, senior debt typically runs at around 2 to 4 times EBITDA, with some specialist lenders stretching further for unusually strong, stable businesses. So a target making £300,000 of EBITDA might support somewhere in the region of £600,000 to £1.2 million of senior debt. A general guide, not a quote, and every deal is subject to status and the lender's own analysis.

How a Typical Deal Is Stacked

Very few deals are 100% bank debt. The purchase price usually gets covered by layers:

• Senior debt: the largest and cheapest layer, a term loan or acquisition facility secured against the target's cash flow and assets
• Asset based lending: unlocking the target's own invoices, stock or equipment to help fund its purchase, often through invoice finance or asset refinance
• Vendor loan notes: the seller agrees to receive part of the price over time, with interest. Increasingly common in 2026 as a way to bridge valuation gaps
• Deferred consideration and earn-outs: part of the price paid later, sometimes conditional on the business hitting agreed numbers
• Buyer equity: your own money in the deal. Lenders want to see genuine skin in the game, commonly 10 to 30% of the price

A vendor with money left in the deal is also the best due diligence signal there is. Sellers who believe in the business they're handing over tend to be comfortable waiting for part of their money. Sellers who want every penny on day one are worth a second look.

What Lenders Look For

• Consistent profits: two to three years of stable or growing EBITDA in the target, evidenced by filed accounts
• Quality of earnings: recurring revenue and a spread of customers beats one big contract that could walk
• Your relevant experience: lenders back buyers who know the sector, or who are keeping the management team that does
• A sensible price: if the multiple you're paying is far above the market, the debt maths stops working and lenders walk

Where the money actually sits

An acquisition is rarely one facility. On our panel 45 lenders write commercial mortgages, 19 write secured business loans, 38 write asset finance and 20 write invoice finance, so the freehold, the plant and the debtor book can each go to the lender that likes them best. Commercial mortgage product limits run £25,000 to £50 million. Panel checked September 2026.

Cash-flow lenders publish their shape more clearly than most. ThinCats states an initial funding range of £1m to £30m, leverage of up to 4x EBITDA on cash-flow loans and a maximum 85% loan to value on asset-backed ones, and describes its market as businesses with £0.5m to £40m of gross assets employing 10 to 250 people, with cash-flow lending making up about 75% of its new loans. It was acquired by Shawbrook, completing on 1 October 2025. Read on its own site on 7 September 2026.

The honest reading of that is that a good part of the acquisition market starts above where most owner-managed deals sit. Below £1m the answer is usually a stack: a commercial mortgage on the property, asset finance on the kit, an invoice facility on the debtors, and deferred consideration from the seller doing more of the work than anyone plans for.

Get the Funding Conversation Started Early

The most common mistake we see is leaving finance until heads of terms are agreed. Funding shapes what you can offer and how you negotiate: a buyer who knows their debt capacity can move faster and offer cleaner terms than one still guessing. Sellers and their advisers notice.

Expect the full process, from offer to completion, to run three to six months, with lender due diligence, valuation and legals inside that. If the deal is a management team buying the company they already run, that's its own structure with its own quirks, covered in our management buyout finance page.

Common Questions

Can I buy a business with no money down?

True 100% funded deals are rare and usually involve heavy vendor financing, strong assets in the target, or both. Most lenders want the buyer to have real money at risk. Be sceptical of anyone selling no-money-down acquisitions as a system.

Does my own company's track record matter?

Yes. If an existing profitable company is making the acquisition, its accounts strengthen the whole case, and lenders can look at the combined group's ability to service the debt.

Will I need a personal guarantee?

On SME acquisition debt, very commonly, yes. Understand exactly what it covers before signing: our personal guarantee guide goes through it, and independent legal advice before signing one is money well spent.

What professionals do I need around the deal?

At minimum an accountant for due diligence and tax structuring, and a solicitor for the purchase agreement. The funding broker's job is the debt stack; the advisers' job is making sure what you're buying is what you think it is.

CapExpand Ltd (FRN 1060885) is an Appointed Representative of White Rose Finance Group Limited, which is authorised and regulated by the Financial Conduct Authority (FRN 630772). We are a credit broker, not a lender. We do not provide financial advice.