Most buyers assume financing an acquisition means walking into a bank with a business plan, the way you'd finance a startup. It's a different process entirely — you're financing against a business that already has a trading history, and that history is exactly what a lender wants verified before they'll lend against it.
The four real financing routes
1. A business acquisition loan
A bank or specialist lender funds some or most of the purchase price, secured against the business's own assets and cash flow, repaid over an agreed term (commonly 3-7 years). This is the most common route for established, profitable SMEs with clean, verifiable financials.
2. Vendor finance (seller financing)
The seller agrees to be repaid part of the price over time, out of the business's future profits, instead of taking the full amount at settlement. It lowers how much cash or bank debt you need upfront, and a seller willing to do it is implicitly telling you they believe their own numbers.
3. Asset-based lending
Financing secured specifically against the target's own equipment, stock, or receivables, rather than against general business cash flow. More common in asset-heavy businesses (manufacturing, transport, trades) than in service businesses.
4. A blended structure
In practice, most real deals combine two or three of the above — a buyer cash contribution, a bank loan for the bulk of the price, and a slice of vendor finance to bridge the gap and align the seller's interests with a smooth handover.
What lenders actually want to see
Whichever route you use, the underwriting question is the same one due diligence answers: is the profit real, and will it cover the new debt repayments? In practice, that means:
- Adjusted EBITDA or SDE, with every add-back evidenced — not the number on the tax return, and not the seller's word alone.
- At least 2-3 years of consistent financials, not a single strong year.
- A debt service coverage ratio that comfortably covers the new repayments after the deal completes, not just breaks even.
- Buyer experience relevant to running the business, particularly for larger loans.
Unverified or unevidenced numbers are the single most common reason acquisition finance applications get declined or delayed — which is exactly why the due diligence step and the financing step aren't really separate problems. See the full due diligence checklist →
Can you really buy a business with no money down?
Rarely literally zero. What "no money down" almost always means in practice is a low buyer-cash structure — the seller carrying a meaningful share of the price through vendor finance, sometimes paired with an earn-out tied to future performance, with a lender or the business's own cash flow covering the rest. It still depends entirely on the numbers standing up: a seller won't carry finance against a business they don't trust, and a lender won't fund the balance against one that doesn't service its own debt.
⚠️ What sinks a financing application
- Add-backs the seller can't or won't evidence with records
- Financials that don't reconcile between the P&L, bank statements, and tax returns
- A purchase price that isn't grounded in a defensible valuation method
- No buyer cash contribution at all, with everything relying on the target's own future cash flow
- Declining revenue or margin with no credible explanation
How much deposit do you actually need?
There's no fixed rule, but lenders commonly want to see a buyer contribute somewhere in the 10-30% range of the purchase price in cash, with the balance financed through a loan, vendor finance, or a blend of both. The stronger and more evidenced the target's numbers, the more flexibility you typically have on that split.
Get the verified numbers a lender will actually want
Upload the seller's figures and BuyBuildSell calculates Adjusted EBITDA, flags red flags automatically, and gives you the evidenced numbers behind any financing conversation — free during your trial.
Frequently asked questions
How do you finance buying a business?
Most acquisitions combine a business acquisition loan, vendor finance from the seller, and the buyer's own cash contribution. Larger or asset-heavy deals may add asset-based lending against the target's own equipment, stock or receivables.
Can you really buy a business with no money down?
Rarely literally zero, but low-cash-in deals are real, usually relying on the seller financing a meaningful share of the price. Lenders and sellers both still need to see the business can service the debt.
What do lenders look for before approving an acquisition loan?
Verified, adjusted EBITDA or SDE with evidenced add-backs, 2-3 years of consistent financials, a debt service coverage ratio that comfortably covers repayments, and relevant buyer experience.
What is vendor finance in a business sale?
Vendor finance is where the seller agrees to be repaid part of the sale price over time out of the business's future profits, instead of receiving the full amount at settlement.
How much deposit do I need to buy a business?
No fixed rule, but lenders commonly want a buyer to contribute 10-30% of the purchase price in cash, with the balance financed through a loan, vendor finance, or both.
Related: Due diligence checklist for buyers · How to value a business · EBITDA multiples by industry · Asking price vs valuation.