I want to buy a business, or buy out the owner
Ways to pay for buying a business, from loans to backers who take a share, cheapest first.
Buying a business usually takes more money than running one, and lenders look at two things: the business you are buying and you. They want to see that its profits can pay back what you borrow.
Most purchases are paid for with a mix: some of your own money, a loan, and sometimes money from a backer who takes a share. If you are a manager buying the business you work in, a management buyout is the usual name for it. Selling shares to pay for a purchase gives away part of what you are buying, so it sits higher on the ladder.
10 routes to look at, cheapest first
Compare the first 4 side by side- L1
Very cheap or subsidised
Borrowing on better terms than the market, usually because a public body, community lender or large buyer is involved. - L2
Mainstream secured debt
Standard borrowing from banks and mainstream lenders, often secured on assets or backed by a personal guarantee.- Government-backed and community lending
British Business Bank regional investment funds
Government-backed funds for smaller businesses in each nation and region, offering loans from £25,000 to £2 million and equity up to £5 million through local fund managers. Terms are commercial, not subsidised.
Weeks£25k to £5mLoans, or shares if you choosePersonal guarantee likely - Government-backed and community lending
Development Bank of Wales
The Welsh Government's own development bank, offering loans from £1,000 to £10 million and equity investment to businesses based in Wales or moving there. Loans are priced on risk.
Weeks£1k to £10mLoans, or shares if you choosePersonal guarantee likely - Bank and mainstream debt
Bank term loan
A fixed amount borrowed from a bank or other mainstream lender and repaid in regular instalments over an agreed term, with interest.
WeeksPersonal guarantee likely
- Government-backed and community lending
- L3
Specialist secured debt
Borrowing secured on specific assets such as invoices or stock, with more fees and conditions than mainstream debt.- Asset-based and specialist lending
Asset-based lending (ABL)
A loan or credit line secured on a mix of business assets, such as invoices, stock, equipment, property and sometimes intellectual property, with the amount based on what those assets are worth.
Weeks - Asset-based and specialist lending
Mezzanine and private credit (larger companies)
Tailored loans from specialist funds rather than banks, for established companies, often for acquisitions, expansion or refinancing. Flexible and larger than bank lending allows, but more expensive, and mezzanine can turn into shares if you cannot repay.
MonthsMay give up shares
- Asset-based and specialist lending
- L4
Expensive or fast
Quick to arrange, often unsecured, and usually the most expensive way to borrow. - Equity rungs. These routes cost no interest, but you give up part of the ownership and control of your business. They are ranked by how much you give up, not by a made-up interest rate. Over time, equity can be the most expensive money of all.E2
Significant dilution and investor rights
Investors take a meaningful stake and usually get rights such as a board seat, a veto over big decisions, or a preferred return. - E3
Major dilution, loss of control or public obligations
Investors take control, or the company becomes publicly traded and takes on ongoing public rules, costs and scrutiny.- Private equity investment
Management buy-out or buy-in
Managers buy the business from its owners, usually funded by private equity and borrowing. It lets owners sell and managers take control, but it loads the business with debt and gives investors a large stake.
6 months or moreGives up sharesPersonal guarantee likely - Private equity investment
Private equity (including buy-outs)
A private equity firm takes a large or controlling stake in a mature business to help it grow, often through a management buy-out or buy-in, and sells the stake a few years later.
6 months or moreGives up shares
- Private equity investment
Worth knowing
- Ask the seller whether they would accept part of the price later. Lenders often like to see the seller keep some money in the deal.
- Check the business on Companies House before you agree anything. It shows filed accounts, charges and who controls it.
- Lenders may ask for a personal guarantee. Read what you would owe if the business could not pay.