Business acquisition loans

At a glance

Funds

Buying an established business, MBOs and MBIs

Structure

Stack: term debt + asset finance + deferred consideration

Underwritten on

Target's maintainable earnings and debt-service cover

Buyer contribution

Meaningful equity expected; deal-specific

Personal guarantee

Standard from incoming directors

Scope

Ltd companies (often a NewCo), LLPs, partnerships of 4+

What the lender is actually buying into

Most of a business's price is usually goodwill: profit, customers, reputation, things a lender cannot repossess. So acquisition underwriting starts from the target's maintainable earnings, the profit a sensible buyer can rely on continuing, evidenced by 2 to 3 years of filed accounts and adjusted for anything that will not survive the sale, such as the exiting owner's above-market salary or a one-off contract. The stronger and cleaner that earnings story, the more of the price can be funded as cash-flow lending; the weaker it is, the more the deal has to lean on the target's tangible assets and on the seller's willingness to defer.

The funding stack

### The standard components of a UK small-business acquisition funding structure, and what each is secured on.

| Layer | Funds | Secured on |
| --- | --- | --- |
| Senior term debt | The core of the price, repaid over years from the acquired profit | The target's cash flow; debenture and personal guarantees |
| Asset finance / refinance | The share of the price sitting in equipment, vehicles and machinery | The target's own assets |
| Invoice finance | Working capital from completion day onward | The target's debtor book |
| Commercial mortgage | Any freehold property included in the deal | The property itself |
| Deferred consideration | Part of the price paid to the seller over time | Contractual; often linked to performance |
| Buyer equity | The remainder, and the lender's evidence of commitment | Not borrowed |

Source: FundBiz product pages, July 2026

Each secured layer makes the whole deal cheaper, because money lent against something repossessable prices below money lent against goodwill. If the target owns its kit outright, asset refinance releases cash from those assets at completion; asset finance covers the same ground for funded purchases. A freehold in the deal is usually carved out into a commercial mortgage, which funds property far more cheaply than acquisition debt; run the repayments on the commercial mortgage calculator. And where the target carries a healthy debtor book, funding it through our sister site MarketInvoice covers post-completion working capital so the term debt only has to cover the price.

Government support reaches acquisition lending too: under the Growth Guarantee Scheme, accredited lenders offer facilities up to £2m with a 70% government guarantee, per the British Business Bank's published scheme terms at british-business-bank.co.uk, checked 14 July 2026. The guarantee supports the lender's decision; the borrower remains liable for the full debt.

Management buyouts and buy-ins

An MBO, the existing management team buying the company, is the acquisition lenders like most: the operators are already running the business, so the handover risk that haunts other deals largely disappears. The constraint is usually the team's cash, so MBOs lean harder on debt against the company's own cash flow and assets plus deferred consideration from the exiting owner, with the team contributing what they can meaningfully afford.

An MBI, an external manager buying in, is the same structure priced more cautiously, because the operating track record in this business is missing. Either way, the exiting owner's deferred stake is often the piece that makes the numbers close.

The number that decides it: debt-service cover

Whatever the stack looks like, the credit decision reduces to one ratio: does the target's maintainable profit comfortably cover every repayment in the combined structure? Most term lenders want cover of roughly 1.25 times or better, and they will stress it for rate rises and for the bumps of an ownership change. Run your deal through the DSCR calculator with the full stack's repayments in before any application: if the cover is thin on your own arithmetic, restructure the deal, more deferred, longer term, more asset-secured layers, before a lender does it for you.

Declined, or told the deal is "too small"?

Acquisition finance declines are usually about the deal's shape rather than its substance: goodwill-heavy targets, thin buyer equity, or a ticket size below the level at which a bank's acquisition team engages. Specialist and challenger lenders underwrite smaller and less tidy deals, and restructuring the stack often converts a decline into an approval. Start with what to do after a business loan decline, or see bad credit business loans if director credit history is the blocker.

Eligibility

FundBiz arranges acquisition funding for UK limited companies, LLPs and partnerships of 4 or more partners only. Sole traders are outside our scope. Most purchases complete through a limited company, frequently a new company formed for the acquisition, which fits this scope naturally. Expect to provide the target's filed accounts, a heads of terms or purchase agreement, your completion structure, and evidence of your own contribution. Personal guarantees from incoming directors are standard.

Related finance

For the moving parts of the stack: asset refinance releases cash from owned equipment, a commercial mortgage funds any property in the deal, and unsecured business loans covers how goodwill-shaped lending is sized. For what UK facilities cost right now, with sources, see current business loan interest rates.

Frequently asked questions