Quick answer
Business acquisitions in Australia are usually funded by banks or non-bank lenders, often secured by the buyer's property, with equipment sometimes funded separately by asset financiers. Lenders assess both the buyer and the business being bought: its financial records, the lease, customer concentration and how much goodwill is in the price. Vendor finance and a cash contribution from the buyer often complete the package.
Key points
- Lenders assess the target business's records as closely as the buyer's own.
- Goodwill is hard to lend against without property or other security.
- Combining property security, asset finance and vendor finance is common.
- business.gov.au recommends reviewing three to five years of the target's financial records.
- Main lenders
- Banks, non-banks
- Security
- Buyer property, business assets
- Add-ons
- Asset finance, vendor finance
When you buy a business, a lender is effectively being asked to back two things at once: you, and a business you don’t own yet. That double assessment is why acquisition finance takes longer and needs more paperwork than most business loans, and why the lender type you choose depends heavily on what security you can bring.
Which lenders fund business purchases?
| Lender type | Role in an acquisition | Suits |
|---|---|---|
| Major and regional banks | Main acquisition loan | Strong target financials, experienced buyer, property security |
| Non-bank lenders | Main loan where bank policy is tight | Newer buyers, complex structures, lighter documents |
| Asset financiers | Funding the vehicles and equipment in the sale | Asset-heavy businesses |
| Private lenders | Short-term bridge to meet a settlement date | Buyers waiting on a sale or refinance |
| The seller | Vendor finance for part of the price | Sellers confident in the business |
What will the lender look at in the business you’re buying?
- Financial records. Usually two to three years of statements and returns, plus recent BAS. business.gov.au recommends reviewing three to five years during due diligence.
- Earnings quality. Are profits steady? Do the books match the BAS and bank statements?
- The lease. Remaining term, options and whether it can be assigned to you.
- Customer and supplier concentration. A business reliant on one customer is riskier.
- Owner dependence. Will customers stay once the current owner leaves?
- Goodwill. How much of the price is for intangibles rather than assets.
- Existing debts and security. Including anything registered on the PPSR.
And what will it look at in you?
Your industry experience, your credit history, the cash you’re contributing, any property you can offer as security, and your plan for the first year of ownership. A short, well-reasoned business plan helps a credit team see you as an operator rather than just a buyer.
Weighing up a purchase and wondering how lenders will view it? Send us the outline — there’s no credit check to ask.
How are acquisition deals usually structured?
An illustrative example, with no real business involved: a buyer purchasing a regional café-bakery might fund the purchase with a cash contribution, a bank or non-bank loan secured by their home for most of the goodwill, asset finance for the ovens and delivery van, and a small vendor finance component paid over two years. Each piece goes to the lender type best suited to it, which usually produces a cheaper, more stable result than forcing one lender to fund everything.
Why are acquisition loans declined?
- The target’s financials are incomplete, inconsistent or declining.
- Too much of the price is goodwill with no security behind it.
- The lease is short or can’t be transferred.
- The buyer has no relevant experience and limited cash in the deal.
- The timeline is too tight for the lender’s process.
How do you prepare?
Start talking to lenders before you sign a binding contract, or make the contract subject to finance. Gather the target’s records early and have your accountant review them. Get a PPSR search done. Know your own contribution and what property you’re prepared to offer. If the settlement date is tight, ask about a short-term bridge while the main loan completes. Our guide to lining up finance before you need it has a planning timeline that suits acquisitions well.
What does a lender’s timeline for an acquisition look like?
A realistic sequence once you have a target business:
- Initial discussion with a lender or specialist about the purchase price, your contribution and the security on offer.
- Information gathering: the target’s financial records, the lease, the asset list and the draft contract.
- Lender assessment, which may include the lender’s own review of the target’s earnings.
- Valuations: property security, and sometimes the business itself.
- Formal approval with conditions such as lease assignment, guarantees and insurance.
- Settlement, coordinated with the vendor’s lawyer and any asset financier.
Build this into the contract timeline. A finance clause that gives you enough time to complete it is cheaper than a rushed bridge.
What questions should you ask the seller for the lender’s sake?
- Can you provide two to three years of financial statements, tax returns and BAS that reconcile with each other?
- Are there any debts or security interests over the business assets?
- How long is left on the lease, and will the landlord consent to an assignment?
- Which customers and suppliers are critical, and are their arrangements transferable?
- Would you consider vendor finance for part of the price?
Quick checklist before you approach a lender
- The draft contract of sale and the agreed price.
- The target’s financial statements, returns and BAS.
- The lease and the landlord’s position on assignment.
- Your own contribution and any property security.
- A short plan for your first year of ownership.
One more point worth making: lenders treat franchise purchases a little differently. An established franchise system with a track record gives some lenders extra comfort, and a few lenders have dedicated franchise programs. Ask the franchisor which lenders already fund its network.
Buying a business?
Acquisition finance works best when the right lender type is chosen early. Send a 60-second enquiry with the purchase price, what you can contribute and a little about the business you’re buying, and a lending specialist will tell you how lenders are likely to see it. No credit check to ask, no distributing your details to a list of lenders, and accurate answers help us structure the deal properly first time.
Frequently asked questions
Can I borrow to buy a business without property?
It's harder. Goodwill is difficult to lend against, so lenders without property security usually want a large cash contribution, a strong target business, and sometimes vendor finance. Asset-heavy businesses can use the equipment as part of the security.
What documents will a lender want about the business I'm buying?
Typically two to three years of financial statements and tax returns, recent BAS, the lease, the contract of sale, an asset list and sometimes a valuation of the business. business.gov.au suggests reviewing three to five years of records during due diligence.
What is vendor finance?
It's when the seller agrees to receive part of the price later, effectively lending to the buyer. It can reduce how much you need from a lender and shows the seller has confidence in the business.
Do lenders care about my experience?
Yes. Experience in the industry or in running a similar business makes lenders more comfortable that the business will keep performing after the sale.
Should I check the PPSR before buying a business?
Yes. business.gov.au lists outstanding debts and liabilities, including those registered on the PPSR, among the due diligence checks. You don't want to buy equipment someone else has a security interest over.