Thinking of buying a business but unsure how to finance it?
At Goodwins Business Brokers, we work with buyers every day who are exploring the best ways to fund their acquisition. Whether you’re purchasing a small local business or a growing e-commerce brand, understanding your financing options is essential for a smooth transaction.
In this post, we break down the most common business financing options for buyers, including one increasingly popular method — vendor financing.
1. Traditional Bank Loans
One of the most straightforward methods of financing a business purchase is through a bank loan. These loans typically offer:
- Fixed or variable interest rates
- Repayment terms of 3–10 years
- Secured or unsecured options
To qualify, buyers usually need:
- A good credit score
- A well-prepared business plan
- Financial forecasts and personal guarantees
Pros: Established route, potentially lower interest
Cons: Lengthy approval process, stringent requirements
2. Asset-Based Lending
Asset-based finance uses the assets of the business you’re buying (e.g., stock, equipment, or accounts receivable) as security for the loan.
This type of finance is particularly useful if:
- The business has strong receivables or fixed assets
- You’re looking to leverage the business itself to finance the deal
Pros: Fast approval, lower risk for the lender
Cons: Only suitable for asset-rich businesses
3. Government-Backed Loans (e.g., Start Up Loans or Recovery Loans)
In the UK, government-backed business loans can help buyers who might not qualify for traditional finance. Options include:
- Start Up Loans (up to £25,000 per director)
- Recovery Loan Scheme (for businesses affected by the pandemic)
These are particularly useful for:
- First-time buyers
- Management buy-ins or buy-outs
- Franchise acquisitions
Pros: Lower rates, more flexible lending criteria
Cons: Lower loan amounts, stricter use of funds
4. Private Investors or Angel Funding
Bringing in a private investor can provide the capital needed for your business acquisition. In return, the investor may require:
- Equity in the business
- A fixed return over time
- A say in strategic decisions
This route works best when:
- The buyer has a strong track record
- The business has high growth potential
Pros: Flexible terms, added expertise
Cons: Dilution of ownership, potential conflicts
5. Vendor Financing (Also Known as Seller Finance)
Vendor financing is when the seller agrees to fund part of the sale price, allowing the buyer to spread payments over time.
For example:
- You agree to pay 70% upfront
- The remaining 30% is paid in instalments over 12–24 months
This can be structured as:
- A deferred payment
- A loan with interest
- A profit-share arrangement
Why Vendor Financing Works
- Lower upfront capital needed by the buyer
- Shows seller confidence in the business’s future
- Faster deal completion — less waiting for external approvals
- Useful when traditional finance is hard to secure
At Goodwins Business Brokers, we regularly facilitate vendor-financed deals — especially for service businesses, franchises, or online brands where goodwill and customer retention play a key role.
Pros: Flexible, deal-friendly, helps close gaps
Cons: Requires trust, seller may want security or guarantees
6. Personal Savings or Equity Release
If you have access to personal savings, investments, or equity from another business or property, you may choose to self-fund part (or all) of your acquisition.
While this is the most straightforward option, it comes with personal risk — so ensure you have a robust business case.
Pros: No interest, no lender involved
Cons: Full risk on buyer, limited capital
Which Option Is Right for You?
Each buyer is different — and the best financing route depends on:
- The size and type of business
- Your own financial background
- The seller’s openness to creative deal structures
Our team at Goodwins Business Brokers works with buyers and sellers to tailor each transaction. Whether you’re seeking third-party funding or a vendor-financed agreement, we’ll guide you through every step — from valuation to completion.
Need Advice on Financing a Business Purchase?
We’re here to help. Contact us today to:
✅ Get connected with trusted finance partners
✅ Explore vendor financing options
✅ Receive tailored acquisition support
📞 Call us: 0330 236 7030
📧 Email: [email protected]
🌐 Visit: www.goodwinsbusinessbrokers.co.uk