How to buy a business with no money (UK)

It is done more often than you would think, and almost never with a lender funding 100%. Here is the structure that actually works — the seller, the business’s own assets and its cash flow doing the paying — with a worked example and the reasons deals like this fall over.

The answer in forty words

You buy a business with no money by making the business pay for itself: the seller defers part of the price, a lender advances money against the business’s own assets and cash flow, and you put in effort and a personal guarantee instead of cash. It works when the business is profitable and the seller wants a clean exit more than a cheque on day one.

What "no money" actually means to a lender

No lender funds 100% of a purchase price for a buyer with nothing at stake. But "money" doesn’t have to mean cash in your account. What a lender needs is skin in the game and a repayment source. The repayment source is the business you’re buying. Skin in the game can be a personal guarantee, a charge over property you own, sweat equity that the seller recognises, or a seller who is so keen to sell that they finance you themselves. The buyers who succeed with little cash are the ones who assemble those pieces before they approach anyone.

The five pieces of the stack

1. Deferred consideration. The seller accepts part of the price — commonly 20–50% — paid over one to three years from the business’s profits. This is the single biggest lever and it is far more common than buyers assume, especially in retirement sales where there is no other buyer waiting. It also aligns the seller with the handover going well.
2. Earn-out. A further slice of the price paid only if the business hits agreed numbers after completion. Lets you pay for performance that hasn’t happened yet without borrowing for it.
3. Cash-flow lending. A term loan, typically two to three times the business’s sustainable annual profit, secured on the business and repaid from its cash flow. Lenders want three years of accounts, a buyer with relevant experience, and a plan that shows the loan serviced with headroom.
4. Asset finance. Money against what the business owns — invoice finance against its debtor book, and refinancing of vehicles, plant or property. This often releases cash on completion that goes straight to the seller.
5. Your contribution. Anything from 5% to 20% of the price, sometimes as little as the professional fees. Where it doesn’t exist in cash, it comes from a personal guarantee, a second charge on your home, or a family loan. Every lender will ask what you’re putting in; "nothing" ends the conversation.

A worked example

A £600,000 business with £150,000 of sustainable annual profit and £120,000 of debtors:

• Cash-flow term loan at 2.5× profit: £300,000
• Invoice finance releasing 80% of debtors on completion: £96,000
• Deferred consideration over three years: £150,000
• Earn-out on hitting current profit for two years: £30,000
• Buyer’s contribution: £24,000 — the fees, essentially

The business services roughly £55,000 a year of term-loan repayments and £50,000 of deferred consideration from £150,000 of profit, leaving £45,000 of headroom before the buyer draws anything. That headroom is what the lender is actually underwriting.

Which sellers say yes

Owners retiring with no successor; businesses that have been on the market a while; sellers who care who takes the business on; any deal where the alternative is closing the doors. A seller who needs every pound on completion — to fund a purchase of their own, say — is the wrong seller for this structure, and it’s better to find that out in the first conversation than the last.

What kills these deals

• Buying a business that doesn’t make money. The whole structure rests on profit; a turnaround needs cash you don’t have.
• Overpaying. If the price is 5× profit, no stack services it. Deferred consideration doesn’t make an expensive business cheap; it only moves the bill.
• No relevant experience. Lenders back people who’ve run something like this before, or who are keeping the management team that has.
• A plan that only works if everything goes right. Show the loan serviced at 80% of current profit and you’re credible. Show it serviced at 120% and you’re not.

Where a broker earns their keep

Assembling five sources of money around one deal, in the right order, with each lender comfortable about the others, is the job. As chartered accountants we pre-underwrite the case — sustainable profit, debt capacity, the sensible split between lender, seller and buyer — before it goes anywhere, so it arrives at the lender already answering the credit committee’s questions. Our acquisition-loan guide covers the lending side in more depth, and the buyout calculator gives you rough numbers on your own deal in two minutes.

The honest disclaimer

We arrange commercial finance for limited companies; we do not advise on or arrange consumer credit. Personal guarantees and charges over your home put personal assets at risk, and the tax treatment of deferred consideration and earn-outs needs advice from your own accountant before you sign anything.