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Buying a business? When is the right time to look for finance?


If you are thinking about buying a business, at what point in the process is it advisable to start applying for finance?

Well, there are two main schools of thought...

The traditional way is the one which most people would probably think about first; and is probably the way you were planning to go ahead.

As the buyer, you would wait until you have found the ideal business, the one that ticks all the boxes, and wait until you have put in an offer and have had the offer accepted.

Then, and only then, you would go out to try and arrange the necessary finance for the amount which you need to complete your purchase.

This approach seems to make sense in some ways – namely, that you know exactly how much finance you require.

However, it can cause a few problems for you as the buyer.

Firstly, it immediately puts you under time pressure – no vendor is going to wait around for ever whilst the finance is put in place. And let’s not kid ourselves; it can be a time consuming process to arrange finance for buying a business.

Don’t believe us? Just walk down to your local bank and ask for a meeting with your bank manager to discuss a commercial mortgage – you’d be lucky if they can see you in the next two weeks!

Secondly, there is the risk that if you cannot obtain the full amount of finance, all that research and work (not to mention the expense involved with meeting the vendors, negotiating and all the time spent up to that point), would have all been in vain.

The other way to approach getting the finance to buy a business is to think about finance first. If you know the sort of business that you are looking at buying, then you can go ahead and apply to lenders for finance for that type of business. Getting this finance in place before you have negotiated with a vendor has some clear advantages.

Primarily, you know for certain how much you are able to borrow. Therefore you can focus your time and effort looking at businesses which you know you will be able to afford, and not ones which are out of your price range.

In addition there is the added benefit of a quicker purchase, as much of the effort has already taken place before you make the offer.

The other potential benefit is that by having the finance in place, you are in a stronger positon to negotiate with the vendor, which could result in a cheaper sale price.

Just put yourself in the shoes of somebody selling a business. If you had to choose between two perspective buyers, one who was offering £400,000 but was unsure of the finance they could raise, and the other, who only offered £390,000, but had proof that they were able to get the finance required, who would you choose?

So when is the ideal time to arrange finance to buy a business? At the end of the day, there is no one right answer; it is dependent on who you are and what business you are looking to purchase.

But you don’t need to wait until the last minute – and there are potential benefits from getting the ball rolling as early as possible.


ASC Finance for Business are commercial finance brokers with over 40 years’ experience in raising finance for small businesses and entrepreneurs. To find out more about raising finance to buy a business, speak to your local ASC Director


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