Can I get a loan to buy out a business partner?

Running a business with a partner can be exciting and rewarding, but circumstances often change. There are several reasons why a partner might want to leave the business. If you find yourself in this situation, you might be wondering, “Can I get a loan to buy out my business partner?”

The short answer is yes, but the process requires careful planning, a clear understanding of your options, and the right professional support.

Why buy out a business partner?

Business partnerships don’t always last forever. Common reasons for a partner choosing to exit include:

• Retirement or lifestyle change – one partner may be ready to slow down or step away.
• Differences in vision – you may both see the future of the business differently and decide it’s time to part ways.
• Change in personal circumstances — life events or financial needs may require a partner to leave the business.

Whatever the reason, buying out your partner can be a positive move, allowing you to maintain continuity while shaping the company’s future on your own terms.

How does a partner buyout work?

A partner buyout is essentially the purchase of your partner’s share of the business. The valuation of that share will depend on:

• The overall business valuation (often based on profits, assets, turnover, and future potential).
• The proportion of ownership your partner has.
• Any shareholder agreements or partnership contracts that are in place.

Can I get a loan for a partner buyout?

Yes, borrowing is often the most practical way to finance a buyout. Few business owners have the cash reserves to purchase a significant share outright. Several types of finance may be available, including:

1. Business acquisition loan

These loans are specifically designed to fund the purchase of a business (or part of one, as in a partner buyout). They can provide the lump sum needed to buy out your partner, which you will usually repay over several years. When deciding whether to lend, lenders will assess the company’s financial performance and its ability to service the debt.

2. Commercial loan

A standard business loan may be suitable, especially if the amount required isn’t excessively high. Repayments are fixed and predictable, making planning easier.

3. Asset finance

If your business owns valuable equipment, vehicles, or machinery, you might be able to raise funds against those assets. This option can release cash without disrupting working capital.

4. Invoice finance

For businesses with a healthy sales ledger, invoice discounting or factoring can unlock cash tied up in unpaid invoices. This cash could potentially be used to part-fund a buyout.

What will lenders want to see?

Lenders will want reassurance that your business can thrive after the buyout. They are likely to assess the following:

• Business performance – financials, profit margins, and turnover.
• Prospects – evidence of stability and growth potential.
• Cash flow – your ability to service additional debt.
• Personal track record – your experience, role, and credit history.
• Security – depending on the loan size, lenders may require business or personal assets as security.

You’ll require a well-prepared business plan that demonstrates how you’ll manage operations as the sole owner, outlines your growth strategy, and explains how you’ll cover repayments.

Challenges and considerations

Buying out a partner isn’t just about finding the money. There are other factors to consider, including:

• Valuation disputes – you and your partner might have differing opinions on their share’s value. A professional valuation is frequently the fairest and precise approach.
• Legal agreements – it’s essential to have a solicitor draft or review the buyout agreement to safeguard both parties.
• Cash flow impact – taking on debt will increase monthly expenses, so you need to be confident the business can handle the additional cost.
• Future growth – assess whether the buyout will limit your ability to invest in expansion or new opportunities.

The benefits of financing a buyout

While borrowing money to buy out your partner might seem daunting, it can bring long-term advantages, including:

• Full control – you have the freedom to make strategic decisions without challenge.
• Business continuity – a seamless transition prevents disruption to customers and staff.
• Future rewards – as the sole owner, you benefit from the entire financial upside of growth and success.

Many business owners find that the sense of independence that comes with a buyout outweighs the challenges of taking on debt. While it’s a significant decision, it could unlock the next chapter of growth and success for you and your company.

How ASC can help

At ASC, we’ve been helping entrepreneurs secure finance for over 50 years. Every situation is unique, and so is every buyout. Our role is to:

• Understand your business and your goals.
• Identify the most suitable finance options.
• Present your case to lenders in the right way.
• Save you time and stress by handling the process.

Because we’re independent and not tied to any one lender, we can focus solely on what’s right for you and your business.

If you’re considering a partner buyout and want to explore your finance options, get in touch with us today. We’ll help you find the right solution to make it happen.