Introduction
Are you interested in raising finance to buy a business?
Did you know that there are multiple options, even if your bank says no?
In this guide, you’ll find out everything you need to know about how to raise finance to buy a business, including what your options are and what you’ll need.
What’s in this guide?
Let’s take a closer look and find out more.
Funding Options
Thankfully, in the modern age, there are many different options available for borrowers that either can’t, or don’t want to go down the traditional route of getting funding from your local bank.
Regardless of whether you want to buy a fish and chip shop, manufacturers or a tropical island, you will need to address the problem of financing your purchase.
You can choose from these sources:
✔ Crowdfunding and Peer to Peer Investors
✔ Private investors
✔ Venture capital funds
✔ Small Bank Loans
✔ Large Bank Loans
First, let’s take a look at what you’ll need to apply, then a further look at your options.
About the Business
Accounts
Understandably, you need to provide detailed accounts for all the businesses you intend to buy.
This is where being honest is very important, as your lender could reject your application due to being given misleading information.
After all, there’s nothing wrong with turning a business around and making it profitable.
Revenue
Your revenue projections need to be a realistic revenue forecast for the business.
For instance, you could create a few scenario examples to show your potential lender the likelihood of different outcomes.
This will give them more assurance that you have prepared for different situations.
Note your cash flow, after it’s been affected by outside costs.
Such as, the repayment loan that you are aiming to take out.
Business plan
Although this doesn’t have to be the length of a novel, you should ensure that you are making a credible case for the loan you want to take out.
Plus, the market and your plans to reach that market.
This includes things such as what you intend to do with the business you are buying, like whether you want to keep it as it is or make improvements.
Valuation
You will need to provide evidence concerning the value of the business that you intend to purchase.
Sometimes, businesses will be valued between three and eight times their profit, depending on the situation and the business.
Having an accurate valuation is very important for potential investors, so getting it right is essential for both your application and when looking for funding from different sources.
Agent
You will need to provide contact details for the agent representing the business.
About you
C.V
A C.V or resume with your personal work history is usually required when trying to find financing for buying a business.
You should keep this short and precise, to give just enough information to make your lender confident enough that they are taking a reduced risk by lending to you.
Asset statement
This will usually include everything that you own like your home, and what you owe in terms of a mortgage.
Bank statements
Usually, you have to provide bank statements for the last six to 12 months, proof of your identification and whereabouts you live, this can be done by providing your passport or something similar.
Business Finance Specialists
Business finance specialists help businesses, and owners get the best deals when it comes to loans.
Usually, they will have access to many different providers and offer you a great deal regardless of their commission structure.
It’s important to remember that not all brokers are the same, which means some of them will charge you a commission for finding you a good deal.
Private Investors
Often referred to as ‘angel investors’ or high net-worth individuals, invest in businesses and individuals that prove that they can run a profitable business.
You can usually find angel investors for your finance on websites such as Angels Den, which claims to create the big businesses of the future by finding companies that will still be around in ten years.
Which, in turn, will give their investors a much bigger return on their investment.
In this situation, you would want to have a solicitor or accountant to help you, as there are usually stringent rules around getting private investments.
Venture Capital Funds
250 venture capital funds are in the UK, that want to invest in exciting new businesses with high growth, products and services which are highly competitive and have skilled management teams.
Some venture funds aim to invest £10 million or more in finance and expect a return of £50 million in as little as three years.
These investors will usually want to have involvement in your business, and it’s progress.
Crowdfunding
Crowdfunding is a new way to raise finances, by using groups or pools of potential investors to fund other groups or businesses.
Finally, You can use new campaigns on many crowdfunding platforms to spur social media to share your plan around the globe and hopefully raise all the money you need for your company.
Top 10 business loan providers
1. Boost Capital
Type: Alternative Finance Provider
Loan amount: £3,000 – £500,000
Typical APR: 1.5% – 2.5% monthly APR
Loan term: 4 to 18 months
Boost Capital is a highly recommended alternative finance provider in the UK, with many customers giving this lender five stars on trusted websites such as Trustpilot.
They offer fast funding, with minimal paperwork, approval in 24 hours and access to your funds in around two days.
Representative: Borrow £10,000 for 12 months at 47.9% representative APR. Interest rate of 36.74% p.a. (fixed). Total amount payable is £12,100.
Company rating on Trustpilot: 5 / 5
2. Capify
Type: Alternative Finance Provider
Loan amount: £3,500 – £500,000
Typical APR: 67.89% APR
Loan term: 6 to 10 months
Capify is another highly rated lender, who has been around since 2008 and they have helped thousands of business owners to grow and sustain their business.
Focused on small to medium enterprises, they aim to give you a decision within 60 seconds and solutions tailored to your business.
Representative: Borrow £24,000 for 12 months at 67.89% representative APR. Total amount payable is £29,472.
Company rating on Trustpilot: 5 / 5
3. Funding Circle
Type: Peer-to-Peer Lender
Loan amount: £5,000 – £500,000
Typical APR: Rates start from 4.5% per year AER
Loan term: 6 months to 5 years
Funding Circle is one of the peer-to-peer lenders that have been sprouting up around the UK in the last few years.
With a peer-to-peer platform, the lenders are regular citizens that want to help their savings grow by investing in UK businesses.
For businesses, this means low AER and only a couple of extra fees.
Representative: Borrow £20,000 for 12 months with fixed monthly payments of £1,752 a month, with a completion fee of 2.5% and interest of around £526. Total amount payable is £21,026.
Company rating on Trustpilot: 5 / 5
4. Shawbrook Bank
Type: Bank
Loan amount: £250,000 to £25 million
Typical APR: 0% to 19.9% APR
Loan term: Bespoke repayments
Shawbrook Bank offers their business customers a range of services tailored to their companies, like asset finance, working capital solutions, the point of sale finance and structured finance, as well as commercial mortgages too.
This means that for startup businesses you could finance for the road ahead with equipment and salaries, or even established companies can benefit from more substantial amounts to help you fund expansions.
Company rating on Trustpilot: 5 / 5
5. Government Startup Loan
Type: Government Loan
Loan amount: £500 – £25,000
Interest: Fixed 6% interest p.a.
Loan term: 1 year to 5 years
Government loans are loans that are funded by government-backed organisations, who usually offer either regional or national businesses different loans depending on their location.
With this loan, in particular, it is aimed at startups less than 24 months old who could benefit from not only finance but mentoring, to help your business grow and thrive.
Representative: Borrow £20,000 for 12 months with fixed monthly payments of £1,721.33 a month, with interest of around £655.94. Total amount payable is £20,655.94.
Company rating on Trustpilot: 5 / 5
6. Spotcap
Type: Alternative Finance Provider
Loan amount: Up to £250,000
Interest: 22.80%, which includes both interest and fee.
Loan term: 1 month to 24 months
Spotcap is a highly regarded alternative finance provider, who since their launch in 2014, has raised £90 million globally, 500 active partners and over 1000 customers.
Although they are a relatively young provider, they have already become a fast favourite according to their five star Trustpilot rating.
Representative: If you borrow £100,000 over 12 months at a representative rate of 24.2% APR, with an interest rate of 1.40% fixed, you will pay 12 monthly instalments of £9,111 which would mean a total repayment of £109,332.
Company rating on Trustpilot: 5 / 5
7. iwoca
Type: Alternative Finance Provider
Loan amount: £1,000 – £150,000
APR: 49% representative APR
Loan term: 0 to 6 months
iwoca prides itself on providing their customers with fair decisions, lightning-fast applications, outstanding flexibility and service.
Thousands of companies have borrowed £500 million, and they could be an excellent fit for many different businesses regardless of size.
Representative: Borrow £10,000 for 12 months at 49% representative APR. Interest rate of 40% p.a. (fixed). Total amount repayable is £12,165. Actual rate may vary based on circumstances.
Company rating on Trustpilot: 5 / 5
8. Ezbob
Type: A lending platform for banks and financial institutions
Loan amount: £1,000 – £120,000
APR: 38.9% APR
Loan term: 1 to 12 months
Ezbob is bringing a change to the way that banks and other financial institutions lend to consumers and small to medium enterprises.
They act as a middleman between banks and customers, so they can offer the excellent rates that you’d typically find when looking to borrow from a bank, but their exceptional customer service.
Representative: Borrowing £50,000 over 12 months would mean you would be repaying £58,873. These payments would be £4,166 a month plus interest on your remaining balance.
Company rating on Trustpilot: 5 / 5
9. Fleximize
Type: Alternative Finance Provider
Loan amount: £5,000 to £500,000
APR: 46.8% APR
Loan term: 1 – 48 Months
Fleximize was named best business finance provider by the British Bank Awards in 2018.
They claim to allow your business to grow at the pace it needs to, by offering relatively long borrowing terms of up to four years, and up to half a million pounds.
This could be a perfect fit for companies looking to purchase their property or vehicles.
Representative: For loans of £25,000 or below: If you borrow £12,500 over 15 months at a Representative rate of 46.8% APR and an annual interest rate of 39.0% (fixed), you will pay 15 monthly instalments of £1,066.11. The total charge for credit will be £3,491.65, and the total amount payable will be £15,991.65.
Company rating on Trustpilot: 5 / 5
10. Danske Bank
Type: A lending platform for banks and financial institutions
Loan amount: No minimum or maximum
APR: Interest is calculated daily and applied monthly.
Loan term: 12 months
Danske Bank, as the name suggests, is a subsidiary of Danske Bank Group which originates from Denmark.
They can offer their customers a bridging loan, which doesn’t have a minimum or maximum amount and can be used for things such as constructing premises, renovations or letting you close a deal without having to wait for another transaction.
Repayment is usually made in a lump sum at the end of your term.
Company rating on Trustpilot: 4 / 5
This list of the top ten business loan providers mainly takes into consideration the companies customer reputation, how much your business can borrow and the interest your lender will charge you.
Conclusion
Are you looking to raise money for your business?
Why not take a look at the ExpertSure guides today and find out more about the different methods you could use today.
Fill in the form at the top of the page and get a bespoke quote.
