A useful guide on loans to buy a business


Starting a business from scratch and getting it off the ground is difficult, especially with the cost of living on the rise – buying a business that is already established could be a solution. Many benefits come with buying a business, you’ll have a customer base already built up, and a range of reliable suppliers already at hand. Buying a business can be rewarding, but you’re likely going to need financial support to do this – there are finance options for all requirements that can help. Read on to find out more about these loans and the factors to consider during the process.

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Why buy a business?

Some may wonder why you’d want to buy a business, rather than set up your own. When buying a business, you may not have the ability to take it in the exact direction that you’d choose, but it does mean you get to buy a business that is already well-established. It can be difficult, especially in current times, to get a new business off the ground. Choosing to buy a business means you don’t have to worry about that as factors such as customers, suppliers and reputation will already be in place for you.

If you choose to buy a business, you are likely going to need some extra funding to make the purchase. It is common for those that are looking to purchase a business to choose a loan or to help make their acquisition. There are many loans available that are perfect for this which we will look at in more detail below, that come with various conditions and requirements that you must meet. With a credit score and the correct documentation depending, applying for a loan to buy a business can be a relatively simple task. But there are a few factors to consider…


Once you’ve chosen a business that meets your credentials, there are a few evaluations that you will need to carry out to ensure you’re getting the best deal. Just like purchasing any type of product, you should compare the valuables that make up the company and decide whether the price is worth it.

Hiring a professional to help you do this is advantageous so that you can make sure every little detail is correct, from assets to financial variables and products and services. Taking the time to review these factors means you can decide if the company is worth the asking price and can help you decide on the financial help you will need.

Assessing your options

Deposits: So, before you can apply for a loan, it’s worth assessing what you’re going to need to get the ball rolling. You should consider factors like a deposit. You will need to make a down payment on a business in many cases, and this will have to be funded by you, however, this can make lenders realise that you are serious about making your business acquisition successful and may help with your loan approval.

Credit Score: Just like applying for any loan, you need to take into consideration your credit score. You can improve your credit score in preparation for applying by making sure you meet repayments on time, whether that’s a credit card or bills from suppliers. The higher your credit score, the more likely you are to be approved for your business loans.

Business plan: Having a business plan is essential when applying for a loan to buy a business – your lender may ask you how you plan on making your new endeavour a success and how you plan on maintaining its growth. You can develop your own plan or use tools online to help.

Types of loans 

When you’ve done your research, checked all your initial requirements and decided to go ahead with buying the business, you can start looking at some of the loans that may benefit you. Below, we’ll look at the options you have that can help you with your purchase.

Commercial mortgages

A commercial mortgage could be beneficial if you need to borrow more than £25,000. There are two types of commercial mortgages, an owner-occupied mortgage which means you’re buying a property to trade from, or an investment mortgage when the business is purchasing a property as an investment. You can use these mortgages for development, refurbishments, or equipment.

Unsecured loans

This type of loan is often popular with small businesses – because it is unsecured, it means it does not require collateral that you may not have if you fail to meet the repayments. You still must pay back this loan, but you can choose a plan that best suits your finances, so you can ensure you can meet the repayments without putting yourself in any financial difficulty.

Business Grants

Along with these loans, it might be worth looking for other finance options that might be available to you. They are a way of gaining free funding, but they are not as easy to come by as your traditional loans. Grants are usually designed for specific types of businesses, like research or growth projects, and they have a list of criteria you must meet to be approved. If you think your new business falls into a category that may be eligible for this type of funding, it is always worth doing a bit of research to see if you could benefit.

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