4 Ways To Fund Your First £1m Business Purchase

Have you ever wondered how people seem to easily buy million-pound businesses, even when they don’t have all the money to buy them?

I did this when I bought a company with £1.6 million in sales and 27 employees.

So in this article, I’m going to show you 4 real ways you can fund your first million-pound business purchase, without actually having millions yourself, even if you’ve never bought a business before.

But that £1.6m-turnover company wasn’t my first attempt to buy a business.

Before it, I agreed a deal to buy a civil engineering business.

Which is where you’ll see these four funding methods work in the real world.

Right up until I lost the deal because of the mistakes I didn’t even realise I was making.

Here’s exactly what happened:

A few years ago, I’m sitting in the seller’s office, and he wants £850,000 for his civil engineering business.

We go through the numbers for an hour or so, and eventually I look up and say:

‘I’d be prepared to pay £480,000.’

He leans back, and just stares at me.

Then he says, ‘Yes, I’d be happy to accept.’

And my stomach just drops.

Because I’d just agreed to buy a business for nearly half a million pounds, and I didn’t have the money.

So, I had about two seconds to either panic, or lead with a plan.

And luckily, I already knew exactly how I planned to fund it.

Here was the first part of the plan.

Buying a business funding source #1: Asset finance.

My plan was to use the business’s own equipment, like the diggers and tarmac machines, to raise cash towards the deposit.

And the reason I like asset finance is it’s fast, it usually comes with no personal guarantees, and lenders will often give you 60–70% of the asset’s value.

But here’s the catch:

I’m trying to raise finance on assets in a company I don’t even own yet.

And yes, it’s possible.

I got £75,000 agreed with Lombard, but only with the seller’s sign-off, because at this point it was still his company.

So at this stage:

I’ve got £75,000 lined up, but I’m still short by £405,000.

Which meant I needed the next part of my plan to work.

And here’s how that conversation went with the seller:

I’m still sitting in his office.

I take a deep breath, because if he says no to this, my plan doesn’t work.

I say, "What if I use invoice finance to fund the next part of the deposit, which is basically borrowing against unpaid invoices?"

He doesn’t answer right away, but then he finally looks back at me.

And I’m thinking:

Have I pushed this too far?

Is this about to fall apart?

And then he say, ‘Yes, I’m sure we can make that work.’

And in my head, I’m thinking: Wait. This might actually happen.

But then I had an even bigger question to ask him.

This next question was the scary one for me, but first you need to understand invoice finance, because it’s what made this next ask possible.

Buying a business funding source #2: Invoice finance

Invoice finance, which is also called factoring, is where a lender advances cash to the business against unpaid invoices, and then gets repaid when the customer pays.

Typically, you can release around 80–85% of the invoice value up front, so in my case, that represent about £120,000 towards the deposit.

And just like asset finance, I learned something surprising:

You can put this in place before you own the business, but only if the seller agrees, because it’s still his company at that point.

The downside?

It’s expensive, it can annoy customers if it’s handled badly, and it really only works if the company sells business-to-business, and not to the general public.

So now, I had £75,000 in asset finance and £120,000 in invoice finance, but I was still short by £285,000.

Which brings us to the next step.

And this was the one that made me nervous, because if he said no to this, the whole deal simply wouldn’t have worked.

Here’s how I started that conversation:

We’re still sat across the desk in his office.

This is the question I’d been dreading.

I take a breath, look him in the eyes and say:

‘Would you be open to seller financing as part of the deal?’

He frowns.

And just stares at me for a second.

And I’m thinking:

That’s it.

I’ve pushed this too far.

I’ve already used his assets to raise part of the deposit, and now I’m asking him to fund part of his own sale.

And then he says: ‘What does that mean?’

My mind starts racing, because he doesn’t even know what seller financing is.

Which means the entire deal now depends on how I explain this next bit.

Which is:

Buying a business funding source #3: Seller financing

When he said, “What does that mean?” I explained it like this:

“It means instead of me paying you everything on day one, you let me pay part of the purchase price later, and I pay you back over an agreed period.”

And once he understood what it meant, he agreed to £260,000 of seller finance, at 0% interest, paid over 60 months.

And with no personal guarantees.

And the important part:

The seller finance repayments are designed to be paid from the business’s cashflows after completion.

But this is what surprised me about seller financing:

It took about 15–20 minutes to agree, where part of this time was taken in explaining the concept.

Try doing that with a bank.

You’re talking weeks or months, with paperwork, credit checks, extra due diligence, and restrictions on what you can and can’t do in the business, and even then, you won’t get terms like that.

But here’s the key lesson:

I didn’t start the meeting by asking for seller finance.

I spent time understanding his business, why he was selling, and what he cared about, so trust had a chance to build.

Because the moment you ask for seller finance, you’re basically saying:

“Will you lend me your money?”

And nobody does that for someone they don’t trust.

But there’s another benefit most first-time buyers miss:

Seller financing isn’t just a way to fund the deal.

It’s also a form of protection, because you’re not paying the full price on day one.

Which means if there’s a dispute after the deal has completed, for example, the numbers were overstated or a liability appears, you’re not trying to claw money back, because part of the price is still outstanding.

And if the agreement is drafted properly, you can often set that loss off against the remaining seller finance payments.

And finally, when a seller agrees to finance part of the deal, it tells you something very important too:

They’re basically saying, ‘I’m confident that this business will still make money, after I’ve left.”

That’s a huge green flag.

So, now I had £455,000 agreed, but I was still short by £25,000.

And honestly, the money wasn’t the only thing that was bothering me.

I’d just agreed to buy a civil engineering business, and I knew nothing about civil engineering.

So, I needed two things: someone to run the business, and I wanted them to have skin in the game too.

Fast forward, and I’m sitting in my friend’s lounge with him and his wife.

And after a bit of small talk, I lean in and say:

‘I’ve got an opportunity to buy a civil engineering business.

Would you consider leaving your job and coming in to run the business for me?’

He looks at me, then glances at his wife.

And before he can answer, I add:

‘And to make it worth your while, would you be willing to invest part of the purchase price as well, so you’ve got a meaningful stake in the company?’

Another period of silence.

And then he says, ‘Yes, I’d love to.’

And I sit back thinking:

That’s it, I’ve found the missing money, as well as the person who can actually run the business for me.

And that brings me to the final piece of the funding plan.

Buying a business funding source #4: Investor finance

I asked my friend to invest £25,000 to plug the final gap, in return for 5% of the business.

But here’s the warning.

Investor money can be a powerful tool, but choose your business partners carefully.

The wrong investor can cost you far more than the cash they bring, because they’ll want a say in decisions, regular updates, and a return.

And if your personalities clash, it can turn into a nightmare.

So, whilst investor money is a great funding solution, it’s rarely a “cheap” option.

It was at this point, the plan looked complete:

I had the £480,000 lined up, plus I had someone to run the business too.

It felt like everything had finally clicked.

But the deal never completed.

Because what happened next taught me two of the biggest lessons I’ve ever learned about buying a business.

And one of them is something most first-time buyers never see coming.

Read this next article, and I’ll show you exactly what went wrong, and how to make sure it never happens to you: What Happend When I Tried To Buy My Dream Business, And This Wrecked Everything