Quick answer
Buying a business is usually financed with a mix of the buyer's own funds, a loan secured by property, vendor finance from the seller, and sometimes bank finance once the deal is proven. Lenders focus on the target business's trading records, the buyer's experience and available security. Property-secured loans $20k to $5m are common when banks want large deposits or move too slowly.
Key points
- Lenders assess the target business and the buyer together
- Property security often replaces a large cash deposit
- Vendor finance can bridge part of the price
- Budget for working capital after settlement, not just the price
Why buying is different from starting
A business with a trading history is, in principle, easier to lend against than a new one. There are bank statements, customers, staff, suppliers and a track record. The challenge is that the history belongs to the seller, and the buyer is new to it. Lenders want to know two things: is the business genuinely as good as the records say, and can this buyer keep it that way?
The main funding sources
Most acquisitions use a combination of sources rather than one loan. The buyer’s own funds show commitment and reduce risk. A property-secured loan uses equity in the buyer’s home or other property, often replacing the large cash deposit a bank would demand. Vendor finance, where the seller accepts part of the price over time, reduces the upfront cash and signals the seller’s confidence. Bank acquisition finance can play a part when the buyer has a strong profile and time to go through the process. And bridging finance can cover a settlement date that arrives before longer-term finance is ready.
What lenders want to see about the business
Expect to provide at least a year of the business’s bank statements, recent BAS, financial statements if available, the lease and its remaining term, key customer and supplier arrangements, staff details and any equipment finance. Lenders look for steady revenue, sensible margins, a secure lease and no hidden debts. A search of the Personal Property Securities Register shows whether business assets are already financed.
What lenders want to see about you
Industry experience matters enormously. A chef buying a restaurant, an accountant buying a practice or a mechanic buying a workshop are far easier to lend to than buyers from unrelated fields. Prepare a short summary of your background, your plans for the first year and who will run the business day to day.
Using property instead of a big deposit
Banks commonly want a large cash contribution for acquisitions. If you own property, a second mortgage or first mortgage can replace that cash or fund the whole price. Property-secured loans run between $20,000 and $5,000,000, and no valuation is required up front, and interest can be prepaid or added to the loan so cash flow in the first months of ownership stays free. See business acquisition loans and our guide on using home equity for business.
Do not forget working capital
The most common mistake in acquisitions is funding the price and nothing else. New owners need stock, wages through the handover, new systems, branding and a buffer while customers adjust. Map the first six months with the cash flow gap calculator and include that need in the funding plan.
Partner buyouts
Buying out a business partner is a form of acquisition that is often easier to finance, because the buyer already knows the business inside out. Lenders still want to see that the business can carry the new debt without the departing partner’s contribution, and that the buyout agreement is clear.
Due diligence protects you as well as the lender
Engage an accountant to review the financial records and a lawyer to review the contract, lease and any key agreements. Ask why the seller is leaving, check for disputes, and talk to key suppliers if appropriate. Lenders take comfort from buyers who have done their homework, and so should you.
Settlement timing
Business sale contracts set a settlement date. If bank finance is running late, a bridging or property-secured loan can settle on time and be repaid when the bank approves. Raise timing concerns early so options remain open.
An illustrative example
A couple bought a craft brewery from its founder. The bank wanted a large cash deposit and months of review. A second mortgage over their home funded the deposit and working capital, the founder agreed to vendor finance for part of the price, and a bank loan covered the rest once the deal was proven. Settlement happened on the contract date.
Talk through your purchase
Take a minute to enquire with the price, settlement date and the security available. Asking needs no credit check, someone experienced reviews it, and your data stays with us. Plan your acquisition finance.
Frequently asked questions
Can I borrow the full purchase price?
Sometimes, with sufficient property security. Banks usually want a substantial deposit; alternative lenders lean more on equity.
What records should I get from the seller?
Bank statements, BAS, financial statements, the lease, key contracts, staff details and any finance registered against business assets.
Is goodwill something a lender will lend against?
Rarely on its own. Lenders prefer property or tangible assets as security for acquisitions.
What is vendor finance?
The seller accepts part of the price over time, effectively lending to the buyer. It shows confidence in the business and reduces the upfront cash needed.
How long does acquisition finance take?
Property-secured loans can move quickly; bank acquisition finance usually takes longer because of the due diligence involved.
Prefer to start now? Enquire here
About 60 seconds. No credit check when you first enquire, and a person who handles unusual deals calls you back.