Buying a Small Business in the UK

So you’re thinking of buying a small business in the UK, but maybe you don’t know where to start? Well, buying another business can be a great way to extend your portfolio, diversify, widen your horizons or branch into new markets. The process of buying a business can be an arduous one. The road is filled with a fair share of legal and financial red tape, which can be off-putting to some. But with the right guidance, it doesn’t have to be.

The beauty of working with a firm like ours is that you have all the legal and financial capabilities in one place. From the legal and financial due diligence, through to the valuation, financing options and the eventual transaction, we can support your business. So rather than juggling multiple relationships with multiple firms, you can tick multiple boxes with us.

Anyway, enough self-promotion, let’s talk about buying small businesses in the UK and the current landscape for business owners.

Is Buying a Small Business in the UK Worth It?

Despite some economic uncertainty over the last few years, the UK market still offers some lucrative opportunities for entrepreneurs.

Incorporating a business in the UK is only £50, or can be done for free if you work with us, meaning the barriers to entry are low compared to other nations. The inexpensive cost, combined with a strong legal and financial system are just some of the reasons why the UK still presents a solid option for business owners. Along with this, there are several regulatory measures instilled by the government, in an attempt to make the UK a stable place for business owners.

Let’s explore the acts put in place to help business further:

Solid Legal and Regulatory Base

The Companies Act 2006

The Companies Act requires all business owners to provide full financial statements each year and keep accurate records. That way, fraud, and financial misdemeanors are reduced. The act also offers protection for minority shareholders and provides a framework for the formation, management and dissolution of companies.

The Small Business, Enterprise and Employment Act 2015

Introduced recently, the Small Business and Employment Act 2015 aims to simplify the regulatory framework to provide better access to finance and support. But, what does that actually mean?

Well, it’s intended to reduce late payments and make company registration easier, whilst increasing levels of transparency in corporate ownership. It’s designed to help small businesses manage their cash flow by addressing late payment issues, making it a requirement for larger businesses to report on their payment practices.

Smooth Access to Funding

Along with a solid regulatory backdrop, the UK Government is supportive in the funds it offers to new businesses. Let’s take a look at some of the funding that’s out there at the moment:

The Start-Up Loans Program

The Start-up loans program was introduced in 2012 to help entrepreneurs find their feet with new business ventures, stimulating the UK economy in the process. Loans range from anywhere between £500 and £25,000 with a fixed interest rate of 6% per annum.

Alongside funding, the program includes free mentoring and guidance on developing business plans. This helps entrepreneurs navigate those tentative first steps. The program has helped support lots of businesses since its inception, having issued 75,000 loans, totaling around £623 million.

Enterprise Finance Guarantee

The Enterprise Finance Guarantee is another government-backed initiative aimed at supporting small businesses lacking sufficient security to obtain a traditional bank loan. The government guarantees the loan, enabling the business to access the required funds. The scheme offers loans ranging from £1000 to £1.2 million usually over a period of between three months and ten years. This offers lots of flexibility for business owners.

Since its inception, the scheme has supported around 35,000 loans, totaling around £3.3 billion. This funding has been essential to many businesses, providing vital capital that would otherwise be difficult to obtain.

Strong Infrastructure

Alongside a strong regulatory base and access to funding for business owners, entrepreneurs can also benefit from the UK’s solid foundations. What do we mean by that? The infrastructure of roads, railways, and information technology such as broadband networks that keep the UK ticking. For business owners it provides an advantage from day one, helping operations run smoothly.

Transport Links

The government agency Highways England is dedicated to maintaining and improving motorways and roads in England. Recent investments include a £27 billion budget for road improvements between 2020 and 2025, aimed at reducing congestion and improving connectivity across the country.

With better transport links, businesses can manage logistics more effectively by reducing delivery time and costs. For companies operating on a large scale, this could make a huge difference to operational efficiency. For instance, better road networks enable faster transportation of goods, while enhanced rail services facilitate quicker commutes for employees and customers.

Alongside this, better connectivity means small businesses can expand their operations and customer base to national and even international markets.

Broadband and 5G

The UK government has been heavily investing in broadband and 5G technology through initiatives like the ‘Superfast Broadband Programme’. The goal is to provide superfast broadband to 95% of UK premises, ensuring that small businesses, including those in rural areas, have reliable internet access. Fast internet is now essential for modern operations, and the UK’s extensive digital infrastructure helps position it ahead of many other nations.

These advancements aim to give UK businesses a competitive edge in a rapidly evolving global market. They also reflect the government’s commitment to fostering a business-friendly environment, making the UK a more attractive place for entrepreneurs.

What to Consider Before Buying a Small Business UK

While the UK offers many advantages for starting a business, there are some challenges to be aware of. The regulatory environment, although generally supportive, can be complex, particularly for compliance with tax laws and employment regulations.

That’s why before making the leap, it’s worth speaking to one of our tax experts to see if buying, or starting a business is right for you.

Brexit also continues to pose risks, affecting trade agreements and potentially leading to fluctuating tariffs and regulatory changes.

Additionally, the high cost of living in major cities like London can be prohibitive for startups which may influence the decision to set up operations there.

Although there are lots of methods of funding in the UK, it’s still worth bearing in mind that getting financing as a new business without an established credit history can be a challenge.

Finally, the competitive market environment means that businesses must be innovative and efficient to thrive.

But ultimately, buying a business or setting up a business in the UK comes with its own unique risks, and its important to be prepared.

To speak to one of our legal experts on how to buy a business in the UK, get in touch now.

Check out all there is to know about Buying a Business in our Complete Guide to Buying a Business.