Which finance to fund a business acquisition

2 min read

Often a blendAcquisition funding

Deferred + upfrontThe structure

Bridge the gapsWhere short-term fits

Acquisitions rarely use one source

Funding a business purchase usually blends several sources: some cash, some borrowing, sometimes deferred consideration (paying part later), and occasionally equity from an investor. Larger deals may use dedicated acquisition finance structured around the target's cash flows and assets. The art is layering the sources so the deal is funded without over-stretching the combined business. See the answer on a loan to buy another business.

Where each piece fits

Source	Role in the deal
Acquisition finance	Core funding on the target's cash flows/assets
Commercial loan	A chunk of the purchase price
Equity	For larger, riskier or capital-heavy deals
Short-term bridge	Deposit, completion gap or working capital around the deal

A short-term loan often plays a supporting role — funding a deposit, bridging a completion gap, or covering the working capital the enlarged business needs on day one — even when the core purchase is funded another way. See finance for a deposit.

Don't forget post-deal working capital

A common mistake is funding the purchase price to the last pound and leaving nothing for the working capital the combined business needs immediately after completion. Build in a buffer — a short-term facility — so the newly enlarged business can trade from day one without a cash crunch. Check affordability across the whole structure with our affordability guide.

The Credicorp view

Credicorp's short-term business loans and Credicorp Flex line play the supporting roles in an acquisition — deposit, completion bridge or day-one working capital — alongside your core funding, with no personal guarantee. Register to apply. Educational content, not financial advice.

Frequently asked questions

How is a business acquisition usually funded?

Usually with a blend: some cash, some borrowing, sometimes deferred consideration paying part later, and occasionally equity. Larger deals may use dedicated acquisition finance structured around the target's cash flows and assets. Short-term finance often plays a supporting role for deposits, completion gaps or working capital.

Can I use a short-term loan to help buy a business?

Yes, typically in a supporting role — funding a deposit, bridging a completion gap, or covering the working capital the enlarged business needs on day one, even when the core purchase is funded another way. It is rarely the whole answer for a sizeable acquisition but is valuable for the gaps.

What do people get wrong funding an acquisition?

Funding the purchase price to the last pound and leaving nothing for post-deal working capital. The newly enlarged business needs cash to trade from day one. Build in a buffer, such as a short-term facility, and check affordability across the whole funding structure, not just the headline price.