Business acquisition loans: finance to buy a business in the UK

Yes. Business acquisition loans are arranged regularly for UK buyers purchasing established businesses. They can fund partial or full acquisition costs alongside buyer equity. Lenders assess the quality of the target business, its cashflow, profitability, and asset base, as well as the buyer's financial standing and management capability. Sorbus Finance specialises in packaging acquisition cases for the specialist and challenger bank lenders who compete most actively for this type of business.

Acquisition lending typically covers 60–80% of the purchase price, with the buyer providing 20–40% equity. The maximum loan amount depends on the target business's ability to service the debt. Lenders typically require a debt service cover ratio of 1.5x or above (i.e. the business generates at least £1.50 of EBITDA for every £1.00 of annual debt repayments). Loan sizes range from £50,000 for smaller acquisitions to £2M+ for larger SME transactions.

A management buyout (MBO) loan is a form of acquisition finance used when a management team buys out the existing owners of the business they work for. The management team provides equity (cash) and the lender provides the debt component, typically secured against the business's assets and cashflow. MBOs are common when founders want to exit but prefer the business to remain with the existing team rather than selling to a trade buyer or private equity.

Security requirements depend on the loan size and the nature of the acquisition. Common security includes: a debenture (floating charge) over the acquired business, personal guarantees from the directors/buyers, a charge on business property, and in some cases a charge on residential property. For smaller acquisitions, some lenders will proceed unsecured with a strong personal guarantee. We will advise on the security structure most likely to achieve approval.

Acquisition lending involves more due diligence than standard business loans. A typical timeline is: initial credit assessment (2–3 days), heads of terms issued (5–7 days), full underwriting including target business review (10–15 days), legal documentation (5–10 days). Total from application to payout is typically 3–6 weeks for straightforward deals. More complex transactions may take longer. We manage the process and keep all parties aligned on timeline.

Yes. Most lenders require the buyer to contribute 20–40% of the acquisition price as equity, personal funds or existing business capital. This equity contribution demonstrates commitment and reduces the lender's risk. In some cases, vendor loan notes (where the seller defers part of the payment) can substitute for some buyer equity. We structure the deal to maximise the amount of acquisition price covered by the bank loan while meeting lender equity requirements.