Four different purchases
Premises for your existing business
Buying the building your business already trades from, often to stop paying rent and build a long-term asset.
A property you'll move your business into
Buying new premises to relocate or expand into, sometimes needing fit-out works alongside the purchase.
A business's assets
Buying the trade, assets, stock and goodwill of a business without necessarily taking on the company that owns it.
A company's shares
Buying the shares of a company, which brings with it its existing contracts, liabilities and history, as well as its assets.
What makes up the funding need: property, goodwill, stock and equipment, working capital
A business acquisition rarely involves property alone. The total funding requirement often needs to cover goodwill (the value of the trade, customer base and reputation), stock, equipment and machinery, and working capital to keep the business running through the transition.
Lenders will usually want to see how the purchase price is broken down across these elements, because different lenders and products are suited to each.
Ways to fund it: commercial mortgage, business or cash-flow loan, vendor finance, blended finance
- A commercial mortgage, secured on the property element of the purchase
- A business or cash-flow loan, to cover goodwill, stock and working capital
- Vendor finance, where the seller agrees to defer part of the price
- A blended package combining several of the above, structured around the different assets being acquired
Personal guarantees and extra security
Business acquisition finance commonly involves a personal guarantee from the directors or buyers, meaning you could be personally liable if the business cannot repay the debt. Lenders may also ask for additional security, such as a charge over other assets, depending on the strength of the deal.
What lenders assess: accounts, EBITDA, debt service, business plan, management experience
- Historic accounts and trading performance of the business being bought
- EBITDA (earnings before interest, tax, depreciation and amortisation) as a measure of trading profit
- Whether projected cash flow comfortably services the proposed debt
- A business plan setting out how the acquisition will be run and grown
- The buyer's relevant management or sector experience
Sector considerations
Some sectors, such as hospitality, care and licensed trade, have their own specific lender requirements, often including sector experience or specific licences and compliance checks. The specialist adviser can explain which considerations are likely to apply to your sector.
Due diligence, valuation, legal and tax advice
A proper business acquisition should involve independent due diligence on the target business, a professional valuation of the property and any goodwill, and separate legal advice on the purchase agreement. Tax treatment of business acquisitions varies and different tax treatment may apply — take independent tax advice before proceeding.
What a lender is likely to need
- An outline of what's being bought — property, business, or both — and the asking price
- Recent accounts for the target business, if available
- Your own financial position and relevant experience
- An idea of how much deposit or equity you can put in
Who provides the advice and how it is paid for
Commercial Services are referred to a third party. Neither The Mortgage Genie nor PRIMIS are responsible for the service received.
The Mortgage Genie does not provide commercial mortgage advice. Our team will discuss your requirements and, where appropriate, identify a suitable partner adviser. We will explain who they are and obtain your permission before sharing your details.
We do not charge for commercial mortgage advice, because we do not provide it. The specialist will disclose its own fees and how it is paid before you decide whether to go ahead.