Are you thinking of taking the leap and buying a business?
Buying an established business can be an attractive option for many, as you’ll be purchasing a known quantity with historical records of profitability to help with forecasting and putting a business plan together. What’s more, you’ll start with an existing customer base as well as having assets and staffing already in place.
You’ll also likely see cash flow from day one and save on many of the outlays from starting a new business from scratch. You may even already have an in-depth knowledge of the day-to-day running of the company if you are part of the existing management team (and are considering a buyout). It can also be easier to get finance for buying an existing business, as you’ll be able to show financial records that attest to the viability of your venture.
For those who have decided to buy, we answer some commonly asked questions about the finance options available for acquiring a new business as well as for management buyouts.
What’s the difference between an acquisition and a management buyout?
An acquisition is when you buy a business by purchasing most, or all, of its shares to gain a controlling interest. A management buyout (MBO) is also a form of acquisition, except that it’s when the business is bought by the company’s existing management team.
A management buyout can be an attractive option for several reasons. Not only does it save going to market and disclosing potentially sensitive information, but the managers will intimately understand the company’s workings. This means that the seller can leave with the comfort of knowing that things will be left in good hands for the future, resulting in a smooth transition that’s beneficial for all involved.
The main obstacle for management buyouts is that the managers may not necessarily have the resources or funding to buy the business. This can also be an issue for business acquisitions. But there are tried and tested options available.
How do you get an acquisition or management buyout loan?
There are several routes available if you’re looking to buy a business, and these are available even if you’re not an experienced business owner. Options include:
Business loans
One of the most common ways to finance an acquisition or buyout is through a business loans, which allows you to borrow up to £2M for buying a business.
Equipment refinance
Another option for asset-rich businesses is using equipment refinance to leverage their existing assets for a management buyout, which will allow you to release roughly 80% of the business’s current equipment value as working capital (you can carry on using the equipment while it’s on refinance).
Franchise finance
If you’re looking to take on an existing franchise such as a coffee shop or fast food restaurant, then there’s always the option of franchise finance, which can fund the entire franchise cost.
What other loans are available to help for buying an existing business?
Sometimes it’s not about raising the capital for initially buying a business, it’s about bringing something new to the table through modernisation or simply just giving things a refresh.
There are options available if you’re looking to fund new equipment, or even if you want to finance a refit of the existing premises (including building works and decoration so you can really make the business feel like your own). Wherever you need funding, there’s likely to be options available to help.
Can you get an unsecured business acquisition loan?
Where possible we try to provide unsecured loans for management buyout or acquisition loans. We do also have access to lenders who are able to provide secured business loans.
Examples of business acquisition loans
You can get financing for buying virtually any type of business you can think of. From dental practices and accountants to florists and hotels. Whatever you’re thinking of buying, we’d love to help.
How Origin Finance can help
As a specialist broker in acquisition finance, we have access not only to high street banks but also to niche and private lenders. This means that we can find financial support for virtually all of your requirements.
We’ll help you prepare the paperwork, ensuring that your application is as strong as possible.
Reach out for a free, no-obligation quote to find out how we can help secure funding for your acquisition.
