How to buy a business with no money down in the UK
How to buy a business with none of your own money, what the finance stack actually looks like, and why going in with nothing in reserve is a risk you have to plan for.
Reading time6 min read
CategoryBusiness guides
Written byThe bizbritain team
How to buy a business with no money usually means buying it with none of your own money. It does not mean there is no money involved. Most of the cash comes from the business you are buying, and from the seller who is leaving. Deals like this are built by stacking three or four sources of funding together. Lenders will accept other people's money as part of that stack. What they will not do is pretend the risk has gone away, and neither should you.
Section 01
How to buy a business with no money of your own
The phrase is a little misleading, so it is worth being plain about it.
No money down means you are not putting in a personal deposit. It does not mean nobody is putting money in. It also does not mean less scrutiny. A seller who leaves money in the deal is taking a risk on you. So is any lender. Both will look harder at the business, not less hard.
You will still need some cash of your own. Legal fees, an accountant and a buffer for the first few months all have to come from somewhere. Buyers who plan for the purchase price and forget the rest run into trouble early. Our guide on how much deposit you need to buy a business sets out what lenders typically expect a buyer to put in, and why.
There is a bigger point behind the numbers. A deal that can be built with none of your own money is not always a deal that should be. Putting nothing in leaves you with nothing in reserve, and that is a problem that tends to surface after completion rather than before it.
Section 02
The four-part finance stack
Very few purchases of this kind rest on one product. They use a stack, and each part does a different job.
Money the seller leaves in
The seller takes part of the price later, out of the profits the business goes on to make. This is usually called vendor finance or deferred consideration. It is the most common way a buyer bridges a gap.
Finance against the assets already there
Vehicles, machinery and equipment the business already owns can often be borrowed against to raise cash. The asset stays in use. The money helps fund the purchase.
Lending against the money coming in
If the business invoices other businesses, an invoice facility can turn its unpaid invoices into cash from day one. That keeps the business running while you settle in.
A term loan over the business itself
Lenders will lend against a trading business with a steady profit record. The business, rather than your savings, is the security. Government-backed schemes can sit here too.
Not every deal uses all four. A small purchase might need only the first. A larger one usually needs three.
Section 03
What no money down can cost you later
Every part of the stack above is borrowed against the business. None of it is a cushion. That is the trade you make when you go in with nothing of your own.
If everything goes to plan, it rarely matters. If anything goes wrong after the deal completes, it matters a great deal. A key customer leaves, a supplier tightens terms, the seller's contacts drift away. With no money of your own in the business, it lives or dies on its own cash-generating circumstances. There is no reserve to draw on, and the repayments to the seller and the lender fall due regardless.
We see the results of this more often than we would like. Buyers come to us within months of completing, looking for working capital, to refinance a loan they took out to do the deal, or to refinance deferred payments owed to the seller. Each of those requests points to the same thing: a business that was underfunded on day one. Lenders read it that way too. For a small business, it can be fatal.
So treat no money down as a structure to understand, not a target to aim for. If you can put money in, do. If you cannot, build a working capital reserve into the funding from the start rather than hoping the business will generate one.
Section 04
How do you get a loan to buy a business?
The short answer is that a lender assesses the business you are buying, not only you.
Lenders want accounts, usually two or three years of them. They want to see profits covering the repayments with room to spare. They also want to know why the seller is selling. And they want to know what happens to the business when that person walks out of the door.
Your own position still counts. Expect questions about your experience in the sector, your credit history, and whether you will run the business day to day. What changes in a deal like this is where the security comes from, not how carefully the numbers are read. Our guide on how acquisition finance works covers the mechanics in more detail.
Myth 01
“No lender will talk to me without a deposit”
Plenty will. A deposit is one way of showing a lender you have something at risk. It is not the only way. A seller leaving money in the deal does the same job, because the person who knows the business best is backing you to run it.
What stops a deal far more often is thin accounts, a business that depends entirely on the person leaving, or a price the profits cannot support.
That said, a buyer with nothing at stake is a harder case to make, and a lender will want to see how the business copes if trading dips in the first year.
The deposit is rarely what kills a deal. The numbers usually are. But a deal with no cushion is one the numbers have to carry alone.
One government-backed option is worth knowing about. According to the British Business Bank, the Growth Guarantee Scheme supports facilities of up to £2m per business group. It is open to smaller businesses with a turnover of up to £45m. The published wording says the finance can be used for any legitimate business purpose. Buying a business is not listed as an example, so whether it can back a particular purchase is a question for an accredited lender.
Section 05
Where a Start Up Loan fits, and where it does not
Buyers often rule this one out, and they are often wrong to.
A Start Up Loan is a personal loan for business use, backed by the government. According to the Start Up Loans programme, you can still apply when you are buying an existing business. Its published wording is that you qualify even where the business has been trading for more than 60 months under different ownership. The test is whether you have personally owned it for more than 60 months.
The amounts are modest and the terms are fixed. The programme lends £500 to £25,000 per applicant, and up to £100,000 to any one business across its lifetime. The rate is fixed at 7.5% a year. Up to four people can apply for the same business, each applying individually and through the same Business Support Partner.
So where does it fit? It will not fund the purchase price of a substantial business on its own. What it can do is cover the working capital gap that most first-time buyers underestimate. Stock, wages and the first few months of trading all sit in that gap. It is also personal borrowing, so you are liable for it whatever happens to the business.
If you are weighing up a specific business, the order matters. Get the seller's accounts first. Work out what the business can afford to repay. Then decide how much of the price the seller is willing to carry. Approaching lenders with a structure already worked out is what gets you a decision quickly.
Most first-time buyers work with an acquisition finance broker, because the lenders who fund these deals are not the ones on the high street. bizbritain helps buyers put the structure together and take it to the right lenders. If you are still deciding whether this is the right moment, we looked at what falling insolvencies mean for timing.
This guide is general information, not financial advice. Applications are subject to status, affordability and lender criteria.
Got a question the guide didn’t answer? Talk to an advisor.
We’ve helped buyers fund deals from £25k to £10m across 100+ lenders. If you’ve read the guide and you’ve got a business in your sights, our advisors are on the phone now.