Loans to buy a business

A loan to buy a business is finance used to fund some or all of the purchase price of an existing company, usually arranged as a business acquisition loan, a secured loan against the target business, or asset finance covering any equipment or vehicles included in the deal. Most buyers combine this borrowing with a personal deposit of around 10% to 30% of the purchase price, and sometimes seller finance, rather than funding the whole purchase with a single loan. This guide covers the main types of finance available, how much you can typically borrow, what it costs, and how lenders assess an application to buy a business.

How does financing a business acquisition work?

Buying a business with a loan works differently to a standard business loan because the lender is assessing two things at once, your own financial position and the financial health of the business you want to buy. Lenders look at the target company's historic accounts, cash flow, contracts and customer base to judge whether it can service the debt once you take over, alongside your own experience, credit history and any security you can offer.

Most acquisition finance is arranged as a term loan, repaid in fixed monthly instalments over an agreed period, with the shares or assets of the business you are buying often used as security. Because funding usually needs to complete alongside legal due diligence and contract exchange, timelines tend to run longer than a standard business loan application, often taking four to eight weeks from application to funds being released.

What types of loan can you use to buy a business?

There is no single acquisition loan product. Buyers typically draw on one or a combination of the following.

• Business acquisition loan, a term loan specifically for funding the purchase of a company, usually secured against the target business.

• Secured business loan, using property, equipment or other assets you or the target business own as security, often at a lower rate than unsecured options.

• Asset finance, used where the deal includes vehicles, machinery or equipment that can be financed separately from the rest of the purchase price.

• Asset based lending, which combines several asset types, such as invoices, stock and equipment, into one facility, useful for larger or asset rich acquisitions.

• Seller or vendor finance, where the seller agrees to accept part of the price in instalments, reducing how much you need to borrow upfront.

• Unsecured business loan, typically used for smaller acquisitions or to top up a larger secured facility.

Comparison of loan types for buying a business

How much can you borrow to buy a business?

How much you can borrow depends mainly on the purchase price, the strength of the target business, and how much you can put in yourself. Most lenders expect you to fund at least 10% to 30% of the purchase price from your own resources, whether that is savings, retained profit from another business, or an investor, with the loan covering the rest.

For well established, profitable businesses, lenders will often fund 70% to 90% of the purchase price, provided the target company's cash flow can comfortably cover the new debt on top of its existing costs. Lenders typically size the loan against a multiple of the target's maintainable profit, often referred to as EBITDA, rather than the asking price alone, so an overpriced business can be harder to finance in full even if you have a strong deposit.

If you are buying a franchise rather than an independent business, specialist franchise lenders apply similar principles, though funding levels and criteria are usually set with the franchisor's own lending panel in mind.

How much does a loan to buy a business cost?

Costs for acquisition finance in the UK start from 7% APR for the strongest deals, secured against property or a well established business, up to the mid teens or higher for smaller, higher risk or unsecured facilities. The Bank of England base rate, which sits at 3.75% as of mid 2026, forms the starting point that lenders build their own margin on top of.

Representative rates and terms by loan type

Rates and terms are illustrative. Always confirm current terms directly with the lender before making a decision. On top of the interest rate, budget for an arrangement fee, usually 1% to 2% of the loan, plus valuation and legal fees connected to the acquisition itself. See our business loan interest rates and fees comparison for a fuller breakdown. You can also use our business loan calculator to model different loan sizes and terms to see an indication of costs.

What do lenders look at when assessing an acquisition loan?

Lenders assessing a loan to buy a business look well beyond your personal credit score. Expect to be asked for the following.

• A clear business plan setting out why you are buying the business and how you intend to run it.

• Historic accounts and management information for the target business, usually the last two to three years.

• Evidence of relevant industry or management experience, particularly if you are buying a business in a sector you have not worked in before.

• Details of the assets, contracts and key customer relationships being acquired.

• Your own personal financial position, including any assets you can offer as security.

Most acquisition loans, particularly from high street and challenger banks, will also require a personal guarantee, meaning you agree to repay the debt personally if the business cannot. Some specialist and alternative lenders offer facilities with reduced or no personal guarantee requirements, usually in exchange for a higher rate or additional security.

Can you get a 100% loan to buy a business?

Very few lenders will fund the entire purchase price of a business acquisition without any contribution from you. Most expect a deposit of 10% to 30%, and lenders that do advertise higher loan to value lending usually offset this with additional security, a personal guarantee, or a higher rate. Buyers who want to reduce how much they put in themselves typically combine a smaller acquisition loan with seller finance, where the seller defers part of the price, or bring in an investor to cover the deposit in exchange for equity. Structuring the deal this way can bring the amount you need to borrow closer to 100% of the cash required at completion, even if it is not a single 100% loan.

How do you apply for a loan to buy a business?

Applying for acquisition finance generally follows the same core steps, though the process is more document heavy than a standard business loan because the lender needs information on the target business as well as your own.

1. Agree heads of terms with the seller, including the purchase price and any conditions, before approaching lenders.

2. Prepare a business plan and financial projections showing how the combined business will perform and service the debt.

3. Gather the target business' historic accounts, management information and details of key contracts.

4. Apply through us at Capitalise, where you can compare acquisition finance across a panel lenders in one place, rather than approaching each lender individually.

5. Provide additional information and documents, where the lender requires.

6. Complete legal due diligence alongside the lender's own checks, then draw down funds at completion.

If you are setting up a new limited company specifically to make the purchase, sometimes called a special purpose vehicle, lender criteria can work slightly differently to an existing trading company. For a broader look at the application process itself, see our guide on how to get a business loan.

Alternatives to a business acquisition loan

A loan is not the only way to fund a purchase, and most deals of any size use more than one source of finance.

• Personal savings or retained profit from another business, reducing how much you need to borrow and the interest you pay overall.

• Seller finance, where part of the price is deferred and repaid to the seller over time.

• Equity investment from a business partner, family investor or private equity firm, in exchange for a share of the company.

• Asset finance arranged separately for any vehicles or equipment included in the sale, freeing up the main acquisition loan for the rest of the price.

• Refinancing existing business assets once the deal completes, to release cash and repay more expensive short term borrowing used to complete the purchase.

Get help financing your next business acquisition

If you're ready to explore a loan to buy a business, Capitalise compares finance options from across a panel of 130+ UK lenders, so you can see acquisition finance, secured loans and asset finance side by side rather than approaching lenders one at a time. Plus you'll receive dedicated support throughout the process from one of our dedicated funding specialists.