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Business acquisition loan calculator: what the loan costs and whether the target can pay it
Enter the price, your deposit, any vendor loan and the lender's rate and term, and the calculator gives the acquisition loan, its monthly and annual repayments, the total interest and, the number lenders decide on, the debt service cover ratio against the target's free cash flow.
Annuity repayments on an amortising term loan; vendor loan treated as interest-only and included in debt service. Illustrative only; lender pricing, fees and amortisation profiles vary.
Deposit requirements, terms and cover tests differ across banks and specialist lenders. We will run your acquisition across the panel.
Why the cover ratio matters more than the repayment
A monthly repayment tells you what the loan costs; the debt service cover ratio tells you whether the business you are buying can afford it. Lenders take the target's EBITDA, deduct tax and the capex needed to keep it trading, and require what is left to exceed the annual capital and interest by a margin, usually 1.25x to 1.5x. Push the deposit up, the term out or the price down and the ratio improves; a vendor loan improves it too if the vendor accepts an interest-only period while the bank is repaid. The calculator includes vendor interest in the service line so the cover is honest.
From loan to structure
Smaller acquisitions are usually a single term loan plus a deposit and a vendor loan; above roughly £5 million of enterprise value the language changes to multiples of EBITDA and layered debt, which the LBO calculator models. For what lenders assess and how to prepare, read business acquisition loans and the guide to how to get a loan to buy a business. Pricing indicative as of September 2026.
Acquisition loan questions, answered
How much deposit do I need to buy a business?+
Lenders typically want the buyer to fund 20 to 40 percent of the price from their own resources or a vendor loan, so that the acquisition loan is no more than 50 to 70 percent of the price. The exact figure depends on the target's cash flow, the sector and the security available. A vendor deferring part of the price counts towards the gap in most lenders' eyes.
What interest rate do business acquisition loans charge?+
Bank acquisition loans are priced off Bank Rate or SONIA plus a margin; as of September 2026 all-in rates on smaller acquisition loans commonly sit in the 7 to 10 percent range from banks and 9 to 14 percent from specialist cash flow lenders. Arrangement fees of 1 to 2 percent are usual. Indicative only; your rate depends on leverage, term and credit.
Over what term is an acquisition loan repaid?+
Four to six years is typical for a bank term loan, occasionally seven for strong credits. A longer term reduces the annual repayment and improves debt service cover, which is why term is negotiated as hard as rate. Debt-fund facilities may run longer with a bullet repayment at the end.
What debt service cover do lenders need?+
Most require the target's free cash flow after tax and capex to cover the annual capital and interest by 1.25x to 1.5x, tested on the forecast and then annually. A result close to 1.0x means every pound of cash flow goes to the lender, which a credit committee will not sanction.
Can the loan be secured on the business I am buying?+
Yes. Acquisition loans are normally secured by a debenture over the acquiring company and, after completion, the target, plus personal guarantees from the buyer on owner-managed deals. Lenders may also take security over property the target owns. Assets given as security may be repossessed if repayments are not maintained.