Buying a business

Proof of funds when buying a business: what to show before the loan is agreed

Proof of funds when buying a business shows a seller you can pay. Here is what usually counts, and what an agreement in principle can show.

Reading time 5 min read

Category Business guides

Written by The bizbritain team

Proof of funds when buying a business is evidence that you can pay for the deal. Sellers and their brokers often ask for it before a viewing or an offer. You may not have a loan agreed yet, and that is normal. What usually works is proof of your deposit, plus a clear plan for the rest.

This guide covers why sellers ask, what usually counts as proof, and what an agreement in principle can and cannot show.

Section 01

Why sellers and brokers ask for proof of funds

Selling a business takes time. The seller shares accounts and private figures with every serious buyer.

So many sellers and their brokers want to know you can complete before they open the books. It helps them spot people who are only browsing.

It can also help you. Two offers at a similar price are not equal if only one buyer can show where the money is coming from.

If a broker asks, it is usually a routine step. It is not a sign that they doubt you.

Section 02

What counts as proof of funds when buying a business?

Exactly what a seller accepts varies. In practice, most will look for some mix of these four things.

Your deposit
Recent bank or savings statements showing the money in your name. A seller wants to see that it is there now, not that it is promised.
Where the deposit comes from
If some of it is a gift, a family loan or money from selling a property, say so in a short note. A lender will ask the same question later.
An agreement in principle
A lender's written note that it would consider lending a set amount, subject to its checks. Some brokers accept this for the part you plan to borrow.
A letter from your finance broker
A short letter saying you are working with a broker and how much you plan to borrow. It carries less weight than an agreement in principle, but it shows you have started.

Ask the seller's broker what they need before you send anything. Send only what they ask for, and never share passwords or online banking logins.

If you are still building your deposit, our guide to how much deposit you need to buy a business explains what lenders usually look for.

Section 03

Agreement in principle: what it shows and what it does not

An agreement in principle, often called an AIP, comes from a lender before full credit approval. It says the lender would consider the deal, based on what it has seen so far.

A formal offer comes later. The lender only makes one after it has checked the business, the price and you.

Myth 01

“An agreement in principle means the loan is guaranteed”

It does not. It shows a lender is willing to look at the deal properly. The lender can still change the amount or the terms, or decline, once it sees the full figures.

Treat an AIP as proof the deal is worth pursuing, not as a promise of money.

A seller's broker will usually know the difference. That is why your deposit evidence matters as much as the AIP.

Section 04

How to show proof of funds before the loan is agreed

You do not need the loan in place to make a credible offer. You need to show that the money exists and that the rest of the plan holds together.

Before viewings

Get your deposit evidence ready

Download recent statements for the accounts that hold your deposit. Write a short note on where any gifted or borrowed money comes from.

Before an offer

Write a one-page funding plan

Set out the price, your deposit and how much you plan to borrow. Add any money the seller may leave in the deal, such as a deferred payment.

Could you explain where every pound of the price comes from?

Before you commit

Talk to a broker about an agreement in principle

An AIP for the borrowed part makes your offer stronger. It also tells you early whether the deal is fundable at that price.

A specialist acquisition finance broker can look at the deal across a wider range of lenders before you make an offer. We can tell you what is realistic at that price. On advisory deals we take no commission from lenders, and you pay us nothing unless a lender issues an Agreement in Principle.

If you have not found a business yet, you can still start. Our acquisition finance readiness checker asks where you are and how you plan to fund a deal, then suggests next steps.

This guide is general information, not financial advice. Applications are subject to status, affordability and lender criteria.

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