Can you finance a private sale purchase?

You found a digger on Facebook Marketplace. Your bank said no. Here is how it still gets done.

So can you finance a private sale?

Yes.

A limited company, a sole trader or a partnership can finance a private sale purchase. The lender pays the seller, and your business pays the lender back each month.

What is a private sale?

A private sale is when a business buys an asset from a seller who is not a dealer. A dealer buys and sells that kind of asset for a living, so lenders know them.

A private seller is anyone else. It might be a business selling the digger it has had for ten years. It might be an advert on Facebook Marketplace, Gumtree or Autotrader. Our private sale finance page lists what a business can buy this way.

Why do banks say no to private sales?

Many high street lenders do not fund private sales. A dealer has a name, a track record and an invoice the lender trusts. A private sale has more unknowns. Does the seller own it? Is finance still owed on it? A lender with no appetite for private sales says no, rather than find out.

A private sale is often very good value. Some lenders on our panel treat it as a normal job. If no lender will fund it, two routes remain: a business loan, or buy it first, then refinance.

What proof does the seller need to give?

The seller must prove the asset is theirs. That means the original invoice, and proof they paid. Any finance owed on it must be cleared first.

Some sellers do not want to show the invoice, because it shows what they paid. Without it, the finance cannot go ahead.

Here is the honest test. If a seller cannot show an asset is theirs, would you hand over money for it? The lender takes the same view.

Where the invoice is truly gone, some lenders will take other proof. A letter from the seller's accountant has worked for us. It says the asset is on their books and free of finance.

Will the lender inspect the asset?

Most lenders want the asset inspected before they pay, to check its condition and value. The lender may look itself, in person or by video call. It may ask our team to go and send photos. Or it may ask you or the seller to use an app.

If the asset is far away, an in-person check takes travel. Where that would cost a lot, we agree a plan with you first.

Does it cost more than buying from a dealer?

The asset itself often costs less. A private seller has no showroom to pay for, so the price is keener. The finance may cost a little more. The lenders that do private sales tend not to be the lowest-cost lenders. That is about the asset and where it comes from, not your credit.

A big saving on the asset can still beat the dearer finance. We get a lender's approval first, then give you its real figures.

What is it like for the buyer?

It feels like a dealer purchase. The lender asks for the same documents, and hire purchase is the usual agreement. Our team, the lender and the seller handle the extra steps. Your part: put us in touch, and tell the seller early you are using finance. Lenders often want a deposit. A business seller may charge VAT. A person selling usually does not.

Before the lender pays, you sign an acceptance certificate. It says you saw the asset and are happy. A limited company owner should expect to be asked for a personal guarantee. That is a promise to pay if the company cannot.

How long does private sale finance take?

Private sale finance takes longer than a dealer sale. The same day is unlikely, as the lender checks more. Allow extra time. Once approved and inspected, the lender pays the seller direct.

Where does Mackenzie Commercial Finance fit in?

We are a broker, not a lender. We arrange private sale finance for businesses across the UK, from our office in Scotland. We can ask over 120 lenders. If the seller cannot prove ownership, you hear it from us before you commit.

There is no fee to apply. If you stop before the finance is in place, you owe us nothing, unless you agreed the rare inspection fee. Limited companies and LLPs from £15,000. Sole traders and small partnerships need over £25,000. £25,000 or less is regulated, and we arrange that only in the IV postcode area.

Frequently asked questions

This article shares what we have seen as finance brokers. It is general information, not financial advice. Every business is different, so base any decision on your own situation.