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Vendor Finance

Last reviewed 13 June 2026 by Nick Lim, finance broker (FBAA).

Vendor Finance is an arrangement where the seller of a business or property funds part of the purchase price and the buyer repays it over an agreed term. It lets a deal proceed when a bank will only lend part of the purchase, and it is common in business sales where the buyer cannot fund the whole price up front. Vendor finance usually sits behind the main lender as a second-ranking debt, similar in priority to a Second Mortgage, and is sometimes used alongside Private Lending or a Caveat Loan to bridge the gap. Buyers structuring an acquisition can start at our Business Owners Finance Hub.

Why Vendor Finance Matters

Vendor finance can close the gap between what a buyer can borrow and the purchase price, but it changes the risk and the security position for everyone in the deal.

  • Lets a sale proceed when bank funding covers only part of the price
  • Usually ranks behind the primary lender, so it carries more risk
  • Signals the seller's confidence in the future of the business
  • Terms, interest and security are negotiated directly between the parties
  • Can be combined with a Business Loan for the senior portion

Common Features of Vendor Finance

  • Seller carries a portion of the purchase price as a loan to the buyer
  • Repaid over an agreed term, often with interest
  • Frequently secured by a second-ranking charge or caveat
  • Documented in the sale contract or a separate loan agreement
  • May be regulated where it involves consumer property lending

Official reference: asic.gov.au

What is vendor finance?
It is where the seller funds part of the purchase price and the buyer repays it over time, often ranking behind the main loan like a second mortgage.
When is vendor finance used?
Most often in business sales where a bank will only lend part of the price, so the seller carries the balance, sometimes alongside a business loan for the senior portion.
Is vendor finance secured?
Often yes, by a second-ranking charge or a caveat loan that sits behind the primary lender, which is why it carries more risk for the seller.
Is vendor finance regulated?
It can be, particularly where it involves lending to a consumer to buy property, so responsible lending rules may apply. Get legal and credit advice first.
Why would a seller offer vendor finance?
To widen the pool of buyers and achieve a price a bank will not fully fund, sometimes paired with private lending to cover the senior debt.

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