- Who it's for
- UK Ltd companies, PLCs and LLPs acquiring a business, or management teams buying out their own company
- Typical amounts
- £50,000 up to £1,000,000, sized to the deal
- Typical terms
- 1 to 7 years
- Minimum turnover
- £100,000 a year combined/target turnover to use Lending Box
- Security
- Often secured against business and/or personal assets, plus personal guarantees
Indicative only. Subject to lender assessment and approval.
Who it's for
- Companies looking to acquire a competitor, supplier or complementary business to grow.
- Management teams planning a management buyout (MBO) of the business they currently run for someone else.
- Individuals or existing companies acquiring a business from a retiring owner.
- Businesses consolidating smaller competitors in a fragmented sector.
How it works
- 1You tell us about the target business, the agreed or indicative price, and how much of the deal you can fund from your own resources.
- 2We gather financial information on both the acquiring business (or management team) and the target, which lenders need to assess the deal.
- 3We match you to lenders experienced in acquisitions and MBOs, who assess affordability based on the combined or target business's cash flow, not just the buyer's existing accounts.
- 4If an offer is suitable, funds are typically released at completion, often alongside solicitors handling the legal transfer of the business.
How acquisition deals are typically funded
Few acquisitions are funded by a single loan alone. Most combine several sources, and a lender will want to understand the full funding structure, not just its own piece of it.
- Senior debt — a loan secured against the business or its assets, usually the largest single piece of external funding.
- The buyer's own cash or equity contribution — lenders generally expect the buyer to have some funds invested too.
- Seller finance — where the seller agrees to defer part of the price, often linked to the business continuing to perform after completion.
- Asset-based lending — funding released against specific assets of the target business, such as property, equipment or receivables.
Management buyouts specifically
An MBO has its own dynamics, because the buyers already know the business intimately but are typically funding the deal from a standing start.
- Lenders look closely at the management team's track record running the business day to day, not just its historical accounts.
- The existing owner's reasons for selling, and their willingness to support a transition period, can matter to a lender's confidence in the deal.
- Management teams often need to combine personal savings, lender debt and sometimes deferred consideration from the seller.
What lenders assess
Acquisition lenders look at the deal from several angles before committing.
- The target business's historical and projected cash flow, and whether it can realistically service the proposed debt once acquired.
- The buyer's experience and track record relevant to running the target business.
- Due diligence findings — legal, financial and commercial — on the target.
- The overall funding structure, including how much the buyer is contributing and on what terms any seller finance is agreed.
How a broker helps
Acquisition finance deals are rarely straightforward, and lenders active in this space vary considerably in appetite, structure and pace. As a whole of market broker, we help structure the funding request, identify lenders experienced in acquisitions and MBOs, and keep the process moving alongside your solicitors and accountants towards completion.
Our service is free to your business. We're paid a commission or finder's fee by the lender if finance completes; see our Broker Terms for details.
Eligibility
- A UK limited company, PLC or LLP, or a management team forming one to complete the buyout (we can't help sole traders or partnerships).
- A target business with annual turnover of at least £100,000, in most cases.
- A credible business plan or rationale for the acquisition, including how the combined business will service the new debt.
- Due diligence information on the target business — accounts, contracts, and key risks.
- Directors or management team members willing, in most cases, to give personal guarantees.
Documents you'll need
- Heads of terms or a draft sale and purchase agreement for the deal.
- Three years of filed accounts for the target business, where available, plus management accounts.
- A business plan or acquisition rationale, including projected cash flow post-acquisition.
- Details of how the remainder of the purchase price is being funded (own cash, seller finance, other investors).
- Photo ID and proof of address for all directors and guarantors.
Advantages
- Can make growth by acquisition possible without needing the full purchase price in cash.
- Lenders experienced in MBOs understand the structure and can assess the deal on the combined business's prospects, not just the buyer's current accounts.
- Facilities can sometimes be structured in stages, matching funding to completion and post-acquisition integration.
- A successful acquisition can bring in turnover, customers or capability that materially grows the business.
Things to weigh up
- This is one of the more complex areas of business finance; due diligence and legal costs add to the overall cost of the deal.
- Lenders will scrutinise the target business as closely as the buyer, and problems found in due diligence can affect the facility offered or the deal itself.
- Personal guarantees and security are common, given the amounts typically involved.
- Timelines can be longer than other business finance, because legal, accounting and lender due diligence all need to align with completion.
Worked example (illustrative)
A management team of three wants to buy out the engineering firm they currently run, agreed at a price of £900,000. They have £150,000 in combined personal savings to contribute, and the retiring owner agrees to defer £150,000 as seller finance, repayable over three years.
A lender considers a senior loan of £600,000 secured against the business's property and equipment, assessed against the company's historical and projected cash flow.
Using the business loan calculator below, a £600,000 facility over 5 years at an illustrative 10% a year works out at roughly £12,750 a month. The real structure, rate and terms depend entirely on the lender's full assessment of the deal.
Business loan calculator
Monthly repayment
£2,307.25
- Total repayment
- £55,373.91
- Total interest
- £5,373.91
Representative example: borrowing £50,000 over 24 months at 10% a year would cost £2,307.25 a month, £55,373.91 in total, including £5,373.91 interest.
Illustrative only. Your actual rate depends on your circumstances. Indicative only. Subject to lender assessment and approval.
Frequently asked questions
Related guides
Related funding
Lending Box helps UK businesses access business finance, working directly with businesses and their trusted advisers. We are a credit broker and do not provide loans ourselves. All finance and quotes are subject to status and income. Applicants must be aged 18 or over, and terms and conditions apply. Guarantees and indemnities may be required. Lending Box can introduce applicants to a number of providers based on each applicant's circumstances and creditworthiness. We can also make insurance introductions. Lending Box will receive a commission or finder's fee for arranging such finance and insurance introductions. Broker Terms