Business Acquisition Finance

Business acquisition finance is an umbrella term encompassing many different types of loans. Broadly speaking, a business acquisition loan is a type of finance you can use to acquire another business or expand your business by investing in assets, equipment or machinery. You can leverage these loans to make other investments. However, they are usually used to buy tangible assets rather than support your business in different ways, i.e. to create working capital.

Business acquisition loans can be high value, but they tend to be simpler than senior debt and mezzanine financing deals. Senior debt and mezzanine finance are more complex to arrange and used to acquire large businesses or finance significant investments, developments, restructure a business, etc. 

Business acquisition finance isn't only for buying out another business, but you can use these loans for this purpose. However, you can use these loans for any acquisitions that will support your company's growth. There aren't set criteria for these loans, and you can use them to help your business grow via any kind of acquisition, provided there is a solid rationale and use case for doing so. 

Broadly speaking, you can use business acquisition financing to:

• Finance an acquisition or buyout of another business (usually in smaller deals and when the deal doesn't require more complex financing with senior or mezzanine debt)
• Make investments into machinery or equipment that will help you grow your business
• Buy an asset that will support you in scaling your company

Most lenders are open to exploring different use cases if you want to make an acquisition that will add solid value to your business. Business acquisition financing deals need to be supported by numbers and financial projections rather than in situations where an asset or acquisition will 'potentially' add value. Lenders will want to see precisely how you will use finance and how it will increase your revenue, and this might include supporting evidence around current and future demand, financials, costs and so on. 

There are plenty of business acquisition lenders on the market, but getting the deal isn't as simple as just choosing the cheapest rate. You'll want to ensure you have the whole picture and a complete understanding of the benefits or drawbacks of a deal. An offer with a cheaper rate might also come with a more restrictive loan, so you'll need to balance and consider all the deal elements carefully, rather than only on cost. Interest rate aside, there can be other costs you need to factor in to get a clearer idea of the total outlay you will need to make. You may also find there are clauses and stipulations set by the lender you need to be aware of. These can impact how you use the loan, your transaction, and how you pay back the capital and interest payments. Working with a broker who can go over offers with you with a fine tooth comb is the best way to ensure you know to pick the best deal. 

As brokers, we can access all the lenders that offer business acquisition finance. We can broker business acquisition loans of any size, including finance for small and medium businesses. You can use us as a single point of contact to access lenders and save yourself the time of going from lender to lender to collect different offers, which will slow down how fast you can access funds. 

As a broker, we also negotiate loans for you. Most companies sourcing business acquisition loans themselves will need to take packaged products offered by lenders. We can negotiate these for you and work with lenders to adapt the finance package to meet the needs of your business, so financing is a better fit for you.

You can only use business acquisition finance for the project agreed with your lender. You might want to buy another company or invest in an asset, machinery, or equipment. However, it's not flexible in the sense that you can use it to fund different parts of your business or operations – you can only use it for a pre-defined purpose. 

You'll also need to use your business acquisition finance within a certain period, decided between you and your lender. This means you'll need to make the acquisition happen by a specific time, or the lender will withdraw funding. Timing is essential here. If you organise financing too early, you may not have the acquisition deal arranged in time. Too late, you risk the asset or business you want to acquire will fall through before you have the capital you need. We can broker the finance to ensure you get financing when you need it and work through all aspects of the deal with you to help you time finance adequately. 

Repayment will also be an essential topic for lenders. If you are acquiring a business, lenders will want to understand both your financials and the financials of the company you are acquiring. Lenders can consider loan repayment using revenue from both businesses, but accounts must support this. If you are acquiring an asset, lenders will want to ensure you have a good income and that the acquisition will support increased cash flow, supporting repayment.  

Different lenders operate in different parts of the business financing space. Some offer relatively small loans – a few thousand pounds and others provide significant deals of hundreds of thousands or more.

The lender that will be best for you will depend on what you need business acquisition financing to achieve. For more significant deals or if you want to acquire a business, you'll need a lender that can offer more capital and who is a specialist in the space that has a more sophisticated offering in terms of how they can structure the deal. For smaller loans, you won't necessarily need to go with a specialist lender – you can work with a player that offers more straightforward loans.

We work with all the business acquisition lenders on the market and can get the best deal for your business, whether you are looking for a large or small loan. We will get you the best deal available and talk you through all the options, any risks and what you need to be aware of regarding how the finance package can impact your business.