How to Get a Loan to Buy a Business in Australia
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Business Purchase · Goodwill · Acquisition Finance
Buying an existing business is a funding exercise and a transfer-risk exercise at the same time. The lender has to decide whether the earnings survive the seller leaving, how much of the price is goodwill, what security exists, what the buyer must contribute, and whether the valuation, lease, finance clause and working capital all line up before settlement.
Quick Answer
Yes, you can finance the purchase of an existing business in Australia. The lender assesses the business you are buying, especially its maintainable earnings, goodwill, assets, lease and transfer risk, then structures the funding around those facts. A complete deal may combine a business loan, buyer equity, asset or property-backed funding, vendor finance and a separate working-capital allowance.
Also called: business purchase loan, loan for business purchase, business acquisition loan.
How do you get a loan to buy a business in Australia?
You get a loan to buy a business by presenting the target business and the buyer as one transaction. The lender is underwriting earnings you do not yet control, generated by a business whose current owner is about to leave, while also assessing your contribution, experience and security. The central question is whether the cash flow survives the change of ownership.
The practical route is to understand the deal before asking a lender for a number. Get the target financials, lodged activity statements, contract or heads of agreement, lease, asset schedule and purchase-price split; identify what is goodwill, what is tangible, what stock is adjusted at settlement and how much cash the business needs on day one. That tells you what can be funded, what cannot, and which conditions must be solved before the finance clause expires.
It also matters whether the transaction is structured as a going concern, where the operating enterprise continues through the supply and the legal and tax conditions of the transaction are satisfied. A continuing business can be easier to assess than one that has already stopped trading because the lender can see operating cash flow continuing toward settlement. The Australian Government's guidance on buying an existing business covers the due diligence side of that in detail.
No single facility usually covers the whole purchase. The table below sets out what you are actually paying for, where each piece of it is typically funded from, and what secures it.
| What you are buying | What it usually is | Typical funding source | What secures it |
|---|---|---|---|
| Goodwill | Often a large part of the price in service and leasehold businesses, and entirely intangible | Business term funding, buyer equity, vendor carry-back | Business security and guarantees where required; outside security may also support the deal |
| Plant and equipment | Fit-out, machinery, vehicles, kitchen or workshop assets transferring with the sale | Asset finance against each item, or a term facility across the schedule | The assets themselves, registered on the personal property securities register |
| Stock on hand | Counted and valued at settlement, so the figure moves right up to the day | Working capital facility or the buyer's own cash, rarely a term loan | Usually the same general security agreement, sometimes unsecured |
| Freehold premises | Only present where the property is being bought as well as the business | A separate commercial property loan, assessed on its own terms | A registered mortgage over the property |
| Working capital from day one | The wages, rent and supplier payments that fall due before the business pays you | A facility arranged at the same time as the purchase, not afterwards | Typically the business, sometimes unsecured on a shorter term |
| The deposit gap | The shortfall between the price and what the primary lender will advance | Buyer equity, vendor carry-back, or short-term private lending against other assets | Whatever the buyer can offer outside the business, commonly property |
If you are buying in one of the accommodation or service verticals, the funding shape is different enough to have its own page. Go straight to motel finance, caravan park finance, pub and hotel finance or management rights finance rather than working from the general case. For the broader picture of how business lending works before you narrow to an acquisition, start with the Australian business loans guide.
How much can you borrow to buy a business?
There is no single loan-to-value ratio for buying a business. The amount available is assembled across the parts of the transaction: property, plant and equipment, maintainable business earnings, goodwill, buyer equity and any vendor or deferred consideration. Two businesses with the same purchase price can therefore produce completely different funding outcomes.
Four things move the number more than anything else. The first is the tangible-to-intangible split, because property and identifiable equipment give a lender a different recovery position from goodwill. The second is whether the buyer can offer acceptable security outside the business. The third is the quality and transferability of the target's earnings, including whether the financials reconcile to lodged activity statements and whether the profit survives the seller leaving. The fourth is the buyer's experience and the operating plan after takeover.
The useful way to think about borrowing capacity is as a stack, not a percentage. Each facility has its own purpose, term, security and repayment test. The ceiling on the whole deal is the point where one of those pieces stops working, which may be the cash flow, the security, the lease term, the valuation or the buyer contribution. The broader facility logic is explained in the Australian business loans guide.
| Funding route | How it works | When it is used | The trade-off |
|---|---|---|---|
| Business term facility | Debt sized against the target's earnings and the security available | Core funding for goodwill or the trading business where serviceability is supportable | Policy and pricing tighten as goodwill and transfer risk rise |
| Asset finance | Separate finance against eligible plant, vehicles or equipment in the purchase | Where tangible assets form a meaningful part of the price | Only helps with assets a financier is prepared to value and take security over |
| Property-backed funding | Usable equity in property supports part of the acquisition funding | Where the buyer has acceptable outside security and wants to reduce the goodwill funding gap | Puts a personal or investment asset behind a business risk |
| Vendor finance | The seller leaves part of the price outstanding and is repaid after settlement | Where a funding gap remains or the seller is willing to stay exposed to the outcome | The primary lender must be comfortable with the seller's deferred position and documentation |
| Earn-out | Part of the price is paid later if agreed performance measures are achieved | Where buyer and seller disagree about future earnings or goodwill value | Reduces day-one funding but leaves a future liability if the target is met |
How much deposit do you need to buy a business in Australia?
There is no fixed deposit percentage for buying a business in Australia. Your real contribution is the amount the purchase and its day-one cash requirements exceed the debt, vendor finance and other deferred consideration available for the deal.
A useful way to model it is: purchase price + acquisition costs + working capital, less approved debt, less vendor or deferred consideration = buyer contribution. The result moves with the deal. A purchase backed by property and equipment can support a different funding stack from a leasehold services business where nearly all of the value is goodwill.
If the contribution is too high, the real options are to renegotiate the price, change the mix of facilities, add acceptable security, ask the vendor to leave part of the price outstanding, use an earn-out for genuinely uncertain value, or walk away if the economics no longer make sense. Short-term caveat lending or a second mortgage can sometimes solve a timing gap against other property, but the exit needs to be established before that debt is drawn.
The vertical example in how much deposit to buy a motel shows why the same purchase price can require a very different buyer contribution once a freehold is part of the transaction.
| Buyer question | Short answer |
|---|---|
| Can an existing business be financed? | Yes. The lender assesses the target's earnings, assets, goodwill, buyer and security as one transaction. |
| Is there a fixed deposit? | No. The buyer contribution is whatever remains after available debt and deferred consideration, plus costs and working capital. |
| Can goodwill be financed? | Yes, where the earnings behind it are maintainable and likely to transfer after the seller leaves. |
| Can you borrow without owning property? | Sometimes. The lender may rely on business security, guarantees, financed assets and cash flow, but options narrow as goodwill rises. |
| What usually delays the deal? | Incomplete financials, valuation, lease or landlord consents, late structure changes and conditions discovered after signing. |
| What gets forgotten after settlement? | Working capital, payroll and super timing, supplier terms, licences, employee transfer issues and the first stock-replenishment cycle. |
How does a lender decide whether the business can repay the acquisition loan?
A lender tests the maintainable cash flow that should remain after you take over, not simply the profit printed in the seller's accounts. The assessment starts with the target's historical earnings, then adjusts for items that will not continue, the cost of replacing the outgoing owner's work, the buyer's existing commitments, the proposed acquisition debt and the working capital the business needs to keep operating.
The most useful serviceability reconciliation is:
- Start with earnings that reconcile to lodged financial information
- Remove one-off income and unsupported add-backs
- Allow for a commercial cost where the outgoing owner performed work that still has to be done
- Include the repayments and fees on the proposed funding stack
- Include existing commitments that remain after settlement
- Leave enough liquidity for payroll, rent, suppliers, tax and the first trading cycle
Which add-backs count when a lender assesses a business purchase?
An add-back only helps if it is evidenced and genuinely will not continue after the buyer takes over. The seller calling an expense “one-off” does not make it disappear from a lender's serviceability assessment. A credit team will normally want to understand what the expense was, whether it appears elsewhere in the accounts, and whether the buyer will still need to incur an equivalent cost.
In our broking experience, clearly evidenced non-recurring costs and genuinely private vendor expenses are easier to defend than adjustments that remove a real operating cost. Owner remuneration is the classic trap: if the seller worked full-time in the business, adding back all of their wage while ignoring the cost of the buyer or a replacement manager can overstate maintainable earnings. The same problem arises when recurring repairs, marketing, wages or other normal operating costs are relabelled as discretionary.
Different lenders use different coverage tests, so there is no single ratio that applies to every acquisition. The point is the same: a deal can have plenty of security and still fail because the cash flow does not carry the debt, just as a strong business can still be difficult to fund if the security, lease or transfer risk does not work. Where the earnings depend heavily on the departing owner, the reconciliation and the goodwill question become the same question. The broader principles sit in the Australian business loans guide, and the borrowing entity is usually backed by a director’s guarantee.
Can goodwill be financed when you buy a business?
Yes, goodwill can be financed, but the lender is really funding the earnings that justify it. Goodwill is intangible, so the assessment focuses on whether the cash flow behind it is maintainable and transferable rather than on a resale value for the goodwill itself. This is the single biggest difference between an acquisition loan and any other business loan, and it is where most buyer expectations break.
Goodwill is the gap between what you pay and what the tangible assets are worth. In a services business it can be almost the entire price. A lender looking at that has nothing to sell if the loan fails, so it moves the question: instead of asking what the goodwill is worth, it asks whether the earnings that created the goodwill will still be there after the owner leaves.
That reframing is why two identical price tags get different answers. Goodwill attached to a location, a lease, a licence, a recurring contract book or a brand tends to transfer. Goodwill attached to the owner personally, their relationships, their referrals, their name on the door, tends to walk out with them. Lenders are explicit about this distinction even when sale documents are not.
Goodwill lenders will fund against
- Recurring contracts that survive a change of owner
- A long lease in a location customers come to
- A licence, accreditation or permit attaching to the business
- A diversified customer base with no single dominant account
- Systems and staff that run the work without the owner present
- Earnings that reconcile cleanly to the lodged activity statements
Goodwill lenders will discount
- Revenue that follows the departing owner's personal relationships
- A short remaining lease term on a location-dependent business
- One customer producing most of the turnover
- Profit that only appears once owner add-backs are applied
- A licence held personally by the seller and not transferable
- Cash-based takings that do not appear in the reported figures
Where a sale is described as walk in walk out, the price usually bundles goodwill, plant and stock into a single figure. That is convenient for the contract and unhelpful for the lender, who will want the components separated before assessing it. Expect to be asked for a breakdown even where the contract does not carry one. The cafe goodwill and business purchase finance worked example shows the split done properly on a small hospitality deal.
Can you get a loan to buy a business without owning property?
Yes, in some cases you can get a loan to buy a business without owning property. A lender may rely on the target cash flow, a general security agreement over the business, director guarantees and specific security over financed assets. The available options usually narrow as the purchase becomes more concentrated in goodwill or dependent on the outgoing owner.
A general security agreement is a charge over the whole of a company's present and future assets: its equipment, its stock, its debtors, its contracts and its intangibles. It is registered on the Personal Property Securities Register, which describes itself as the online government noticeboard of security interests in personal property. The registration puts others on notice of the security interest and forms part of the priority framework between competing secured parties.
Alongside it, expect to be asked for:
- A directors guarantee from every director, which makes the debt personal if the business cannot pay it
- Specific security over financed plant and equipment, registered separately against each item
- A mortgage over any property offered as additional support, including property you already own
- An assignment or acknowledgement of the lease, so the lender knows the premises are not lost mid-term
- Key person or life cover in some structures, particularly where the business depends on one operator
It is worth understanding the regulatory position before you sign any of it. Business-purpose credit sits largely outside the consumer credit regime, which applies where credit is wholly or predominantly for personal, domestic or household purposes. ASIC states plainly that the law provides the lowest level of protection to commercial loans, including loans to small businesses. That is not a reason to avoid commercial lending, which is how nearly every acquisition in the country is funded, but it does mean the terms you agree are the terms you get. Where a deal needs funding secured on something other than the business, see private lending and the glossary entry on security.
How does the lease term affect how long you can borrow for?
A short lease can limit the loan term, increase the required repayment, or make a location-dependent acquisition harder to fund. Lenders commonly want the facility term and the buyer's right to occupy the premises to make sense together. This is the constraint most buyers discover last, and it changes the repayment on every deal where the business rents rather than owns.
The logic is simple once you see it. The earnings a lender is lending against are produced at a particular address. If the right to trade from that address expires in a handful of years, the loan cannot sensibly run for fifteen. If the lender shortens the facility to fit the occupancy risk, the repayment rises and a purchase that looked serviceable on a longer term may stop working. Options to renew may help, but whether a lender counts an unexercised option toward the term is a policy question that varies, and it is worth asking before you model anything. The same principle applies to a franchise: where the right to trade comes from a franchise agreement rather than a lease, the remaining agreement term does the same work.
This is why leasehold and freehold versions of the same business are assessed so differently, a distinction covered in more detail in freehold versus leasehold going concern. It bites hardest in the accommodation and hospitality trades, where leasehold is the norm rather than the exception: motel finance, pub and hotel finance, caravan park finance and management rights all turn on it.
Why the lender may need the landlord more than once
On some leasehold acquisitions, the landlord is involved in more than the assignment to the buyer. The lender may also require consent or acknowledgement for security over the lease or for access to financed equipment kept on the premises. The exact documents depend on the lease, the jurisdiction and the lender.
The reason is a quirk of how Australian security law is divided. A lease is an interest in land, and interests in land sit outside the personal property securities regime: the Act itself notes that it does not apply to certain interests even where they look like interests in personal property. So the lender cannot simply register its interest in the lease on the Personal Property Securities Register the way it registers over plant, stock and the general security agreement. It takes a mortgage of lease instead, and that is a dealing with the lease, which the lease itself will almost always require the landlord to approve.
Separately, where financed plant sits inside premises the borrower does not own, a lender may also want an acknowledgement from the landlord about access to that equipment. None of these are exotic. They are ordinary conditions on ordinary deals. They are simply not in anyone's control but the landlord's, which is why a silent or slow landlord is one of the most common causes of a leasehold settlement running late.
| What is needed | Who gives it | Why the lender wants it | What happens without it |
|---|---|---|---|
| Consent to assignment | The landlord, usually in writing under the lease | Confirms you hold the right to trade from the premises | The leasehold transaction may not be able to settle as structured |
| Consent to a mortgage of lease | The landlord, as a separate approval | Lets the lender take security over the lease itself | The lender may have no realisable security on the main asset |
| Enough remaining term | Set by the lease, sometimes extended by negotiation | The lender wants the facility term to make sense against the occupancy term | Shorter term, higher repayment, or the deal does not service |
| Landlord acknowledgement on plant | The landlord, where financed assets sit on site | Access to equipment it has funded inside premises you rent | Asset finance may be delayed, limited or subject to extra conditions |
| Landlord engagement, at all | The landlord; response timing varies | Every condition above depends on a response | Settlement drifts while everything else sits ready |
The practical instruction is to read the lease before you agree a price, not after. The remaining term, the option structure, the assignment clause and whether the lease permits a mortgage of lease are all knowable on day one, and all four change what can be funded and over how long.
Does an asset sale or share sale change the finance?
Yes. An asset sale and a share sale can produce different security, due-diligence and documentation requirements for the lender. Which structure is appropriate is a legal and tax decision for the transaction, not a finance shortcut, and it should be settled before the lender documents the facility.
In an asset sale, the buyer acquires the assets listed in the contract into its chosen entity. In a share sale, the buyer acquires the company itself, so the lender and advisers have to understand the history and obligations that remain inside that entity. The table below shows the finance-relevant differences; your solicitor and accountant should determine the legal and tax consequences in your transaction.
| Point of difference | Asset sale | Share sale |
|---|---|---|
| What you actually acquire | Named assets: goodwill, plant, stock, contracts, the lease | The company itself, with everything it owns and owes |
| What comes with it | Only what the contract lists, so employment and contracts are renegotiated or assigned | Everything, including registrations, licences, employment history and existing agreements |
| What the lender secures against | The assets acquired and a general security agreement over your new entity | The existing entity, its assets, and often the shares themselves |
| What the buyer inherits | The seller's entity generally retains its history, while the buyer must identify any liabilities or obligations it agrees to assume | The company's existing history remains inside the entity, making legal, tax and financial due diligence especially important |
| Where the risk concentrates | In transfer: whether the lease, licences and key contracts actually come across | In diligence: whether anything is sitting inside the entity you have not found |
Share sales are chosen where something valuable cannot be transferred any other way, most often a licence, an accreditation, a long-standing supply agreement or a government contract tied to the entity. Professional practices are a common example, and the mechanics are covered in the glossary entry on practice acquisition. Whichever structure you land on, tell your lender early, because a facility approved for one and settled as the other has to be re-papered. For the general facility that sits behind most asset purchases, see business loans.
Are you buying the business, the premises, or both?
Three different transactions travel under the same description, and separating them is the first thing a lender will do. You are either buying a leasehold business, a freehold going concern where the property comes with it, or the property alone with a business attached as a tenant. Each is funded differently and assessed by different teams.
A leasehold purchase means you acquire the business and step into someone else's lease. Your funding is the business funding described above, and your single biggest external risk is the remaining term on that lease, because a facility cannot sensibly run longer than the right to occupy the premises. A freehold going concern means you buy the trading business and the real estate together, which usually splits into two facilities assessed on different criteria, one against the property and one against the business.
This distinction is well covered elsewhere on the site and there is no point repeating it here. Start with going concern explained for the concept, then freehold versus leasehold going concern for how the two compare in practice, and the glossary entry on leasehold for the definition. If the freehold is part of your purchase, the property side is handled through commercial property loans, and settlement sequencing on venue deals is set out in the pub and hotel going concern settlement guide.
Two related purchases route elsewhere entirely. If the deal is structured around the seller funding part of the price, read the vendor finance guide. If you are buying the right to operate and let a complex rather than a conventional business, read the management rights guide.
One point is worth raising with your accountant early rather than late. Where the business and the land are bought by two different entities, for example the trading company taking the business and a separate entity taking the property, whether the supply still qualifies as a going concern is a question that turns on how the transaction is actually structured and documented. It is a common structure and it is not automatically a problem, but it is decided by the contracts, not by intention, and it is far cheaper to settle before exchange than after. The Australian Taxation Office sets out the conditions for a GST-free supply of a going concern, and your accountant should confirm the position for your structure before the contract is signed.
What happens if the business valuation is lower than the purchase price?
A lower lender-supported value can create a funding shortfall even when the buyer and seller have already agreed on the price. The contract price is what the parties negotiated; the amount a lender will support is determined by its own credit and valuation process. Those numbers do not have to match.
The first question is what has been valued. A deal can contain several different value pools: the trading business and goodwill, plant and equipment, stock, and sometimes the freehold property. A lender may rely on different valuation methods or separate valuers for those pieces. If one comes in below expectation, the effect is usually felt in the amount or structure of the debt rather than in the contract price automatically changing.
The practical options are to contribute more equity, renegotiate the purchase price, provide additional acceptable security, move part of the consideration into vendor finance, use a properly documented earn-out where the disagreement is genuinely about future performance, or reconsider the purchase if the valuation has exposed a price problem rather than a funding problem.
A valuation shortfall does not automatically prove that the buyer is overpaying, but it is a reason to stop and understand why the numbers differ. A gap caused mainly by a lender's security policy is a different problem from a gap caused by earnings that do not reconcile, goodwill that depends on the outgoing owner, or assumptions the valuer does not accept. The first is primarily a funding-structure issue; the second may also be a due-diligence and price issue.
This is why valuation belongs before the final funding stack, not after it. Australian Government guidance recommends determining the current value of the business and conducting financial, legal and operational due diligence before committing to buy. Read the Australian Government buying-an-existing-business guidance. Where the gap is structural rather than a pricing problem, it is sometimes bridged with vendor finance or a shorter-term facility such as second mortgage lending, and how the number is arrived at is covered in going concern valuation explained.
How do you fund buying out a business partner?
A partner buyout can be funded by the continuing owner, by the business where legally and structurally appropriate, against outside security, through deferred consideration, or with a combination of those sources. Unlike an external acquisition, the transaction often changes ownership without bringing a new operating asset into the business, so the existing cash flow and security position do most of the work.
These transactions can be easier for a lender to understand than an external acquisition when the continuing owner already has a long operating history in the business. The buyer already knows the business, already appears in its history, and is not a transfer risk. The earnings are not going to walk out the door, because the person buying is the person who has been generating them. That familiarity often does more to get a buyout approved than the security position does.
The mechanics vary. The remaining owner can borrow personally and buy the shares or units directly, or the business itself can fund the buyback of the departing owner's interest, or the exit can be staged over an agreed period so the payment comes out of trading rather than out of a single facility. Which route works depends on the entity structure and the tax position, so this is a conversation with your accountant before it is a conversation with a lender. Where usable property equity is available, property-backed funding such as a second mortgage may form part of the cash component, subject to the cost, priority and exit of that facility.
Buying the family business
A family succession is a partner buyout with a longer timeline and more emotion in it. The funding question is the same, but two things change. Price is frequently set below market, which helps the funding but raises questions the lender and the tax office will both ask, so the valuation basis needs to be documented rather than assumed. And the outgoing generation often stays involved after settlement, which is a genuine advantage in transferring goodwill, provided the arrangement is written down rather than understood.
Where the incoming owner has been working in the business for years, that history is the strongest part of the file. The equivalent structure in professional practices is covered in practice buy-in finance for doctors, and the glossary entry on practice buy-in sets out the terminology.
How does an earn-out work when you buy a business?
An earn-out is a portion of the purchase price paid after settlement, calculated on how the business actually performs once you own it. It is commonly used to resolve a disagreement about what future performance or goodwill is worth without forcing the entire disputed amount into the day-one price.
The logic is straightforward. The seller believes the business will produce a certain result and prices the goodwill accordingly. The buyer is not prepared to pay for a result that has not happened. Rather than one side capitulating, part of the price is deferred and tied to a measurable outcome over an agreed measurement period. If the result arrives, the seller is paid. If it does not, the buyer does not pay for it.
For funding purposes, the effect is genuinely useful: the day-one amount you need to raise falls, sometimes substantially. But an earn-out is a liability, not a discount, and it needs to be treated as one:
- The measure has to be defined precisely, whether it is revenue, gross profit or a specific earnings figure, and stated in the contract rather than left to good faith
- The measurement period, the calculation date and who prepares the figures all need to be agreed in writing before settlement
- Your lender must be told, because a deferred payment obligation affects how much the business can service on the facility you are taking now
- The seller's role during the earn-out period needs defining, since a seller with no involvement and no control over the outcome is a common source of dispute
- The tax treatment of earn-out arrangements is specific and is a question for your accountant well before you sign
Earn-outs are also part of the seller's planning, not just yours, and understanding the other side of the table helps. The glossary entry on exit strategy covers how vendors typically approach a staged departure, and the business owners finance hub gathers the surrounding material.
What documents do lenders need for a loan to buy a business?
A lender needs enough evidence to prove three things: the earnings are real, the earnings can transfer to the buyer, and the transaction can settle with the proposed security and working capital intact. A complete acquisition file is therefore more than financial statements.
The core pack usually includes:
- The signed contract, heads of agreement or agreed commercial terms, including the purchase-price breakdown
- Recent financial statements and lodged activity statements for the target, with tax returns or other lodged records where required
- A balance sheet, profit and loss, cash-flow information and details of debtors, creditors and stock where relevant
- The lease and any options, assignment requirements, franchise agreement or other contract the business depends on
- An asset schedule showing plant, vehicles, fit-out, equipment and any existing finance attached to them
- The buyer's experience, qualifications, personal or group financial position and details of the cash contribution
- A transition plan showing seller handover, key staff retention, management responsibilities and the first trading-cycle working capital
Australian Government guidance on buying an existing business recommends reviewing three to five years of financial records for due diligence, including tax returns, business activity statements, receivables and payables, balance sheets, profit and loss records, cash-flow statements and sales records. A lender may ask for a shorter or different period, but the broader point is useful: the finance file should agree with the due-diligence file rather than tell a different story. See the government checklist.
What a clean file looks like
- Financials reconcile to lodged activity statements
- Add-backs are listed individually and evidenced
- The price is split between goodwill, assets, stock and property where relevant
- The lease has a clear remaining term, options and assignment path
- Buyer experience and the handover plan are evidenced
- Working capital is sized before settlement, not after it
What creates lender questions
- Financials do not agree with lodged records
- The contract carries one lump-sum price with no funding breakdown
- Add-backs are presented as a total with no support
- The lease is near expiry or the option position is unclear
- The buyer has no operating plan for the sector
- Working capital is expected to be solved after settlement
Why should you check the PPSR before settlement?
A PPSR search can show security interests registered against the seller's organisation or particular financed assets. That matters twice: as due diligence for the buyer, and because a new lender needs to understand what existing secured interests must be released, retained or ranked around at settlement. The PPSR says an organisation search can show whether anyone has registered an interest in the organisation's assets; the search does not tell you the value of the debt. See the PPSR organisation-search guidance. Your solicitor should determine which searches and releases are required for the transaction.
The accommodation acquisition lender document pack shows a worked version of a demanding acquisition file. Where the buyer is entering a sector for the first time, new practice versus established clinic approval differences shows how the experience question changes the assessment.
Because commercial lending sits outside the consumer regime in important respects, ASIC notes that lenders that provide only commercial loans are not required to hold a credit licence and are not legally required to be members of the Australian Financial Complaints Authority. Ask about dispute-resolution access before you commit to a commercial lender. Read ASIC's commercial-loan guidance.
Does the type of business change the acquisition finance?
Yes. The same lender still tests cash flow, buyer capability and security, but the risk that matters most changes with the business being bought. A franchise adds franchisor approval and agreement term; a lease-heavy hospitality business lives or dies on the premises and trading evidence; a professional practice can be dominated by practitioner and client-transfer risk; and an asset-heavy transport or manufacturing business may be split between equipment finance and a separate facility for goodwill and working capital.
| Business type | What becomes more important | What it changes in the finance |
|---|---|---|
| Franchise | Franchisor approval, franchise agreement term, transfer conditions, fees, territory and the lease where premises are critical | Third-party approval can become a settlement condition and the remaining agreement or lease term can affect the acceptable loan structure |
| Cafe, hospitality or retail | Lease term, landlord consent, BAS and reported turnover consistency, licences, fit-out, stock and seasonal working capital | More of the value may sit in goodwill and fit-out, while the buyer also has to preserve enough cash for the first trading cycle |
| Professional or health practice | Buyer qualifications, patient or client transfer, practitioner dependence, recurring billings, staff and handover | Transferability of the goodwill and the buyer's capability can carry more weight than tangible asset value |
| Transport or other asset-heavy business | Vehicle or equipment age and value, existing encumbrances, contracts, utilisation and replacement requirements | Plant or vehicles may be financed separately from goodwill, stock and working capital rather than forcing the whole purchase into one loan |
| Manufacturing | Plant, maintenance and replacement capex, stock and work in progress, customer concentration, premises and supplier dependency | Tangible assets can improve the security story, but capex and working-capital needs can reduce the cash flow available for acquisition debt |
The industry label itself is not the credit decision. The lender is trying to identify what could stop the earnings transferring after settlement. For a first-time buyer, that makes the management plan, transferable skills and seller handover more important rather than creating an automatic decline. The worked examples on cafe goodwill and business purchase finance and practice buy-in finance for doctors show how different sectors move the assessment without changing the underlying logic.
The sector-specific detail sits on the pages built for each trade: cafe and hospitality, trades, transport and medical and allied health.
From our broking, indicative
Across Australian business acquisitions, the sector usually changes which weakness a lender investigates first rather than replacing the core credit test. Lease-dependent businesses draw attention to tenure and landlord consent; owner-dependent services businesses draw attention to handover and goodwill transfer; asset-heavy businesses draw attention to the value, age and encumbrances of the equipment.
Indicative only, based on Switchboard broking experience as at 19 August 2026. Qualitative, not lender policy or a statement that every lender treats an industry the same way. Actual requirements vary by lender, transaction and security. Not financial advice.
How long does finance to buy a business take, and what happens before settlement?
There is no reliable universal approval timeframe for a business acquisition. The critical path is usually the target file, credit assessment, any valuation, lease and landlord consents, lender conditions and the finance-clause date. A complete transaction can move materially faster than one where these pieces are discovered after signing.
A contract will often set a date by which the buyer must satisfy or deal with a finance condition. Work backwards from the actual clause your solicitor has reviewed. The finance process and the contract process run beside each other, but they are not the same thing: a lender can be progressing a file while the buyer still has legal deadlines to meet under the contract.
| Stage | What has to happen | What commonly holds it up |
|---|---|---|
| File assembly | Contract, financials, BAS, lease, buyer contribution and purchase-price split are assembled | Vendor records arrive late or do not reconcile |
| Credit assessment | Lender tests serviceability, buyer capability, security and the transfer risk | Unexplained add-backs, customer concentration or a changed transaction structure |
| Valuation and security | Any business, property or asset valuation is completed and security conditions are confirmed | Valuation shortfall, existing security interests or extra reports |
| Lease and third-party consents | Assignment, landlord or franchisor requirements are dealt with where applicable | A third party controls the response time |
| Formal documents and conditions | Loan and security documents are signed and pre-settlement conditions are satisfied | Conditions are only discovered when documents issue |
| Settlement | Funding sources, vendor payment, security releases, stock or other adjustments and legal settlement are coordinated | One unresolved consent, payout, document or funding contribution |
What happens after the lender says yes?
Approval is not the same as money being available at settlement. After credit approval, the lender may still need valuations, security documents, guarantees, evidence of the buyer's contribution, lease or landlord documents, insurance, payout figures, PPSR releases and any other conditions in the approval. Treat every condition as a settlement dependency and give it an owner and a due date.
Does conditional loan approval mean the finance condition is satisfied?
Not automatically. “Indicative”, “conditional”, “formal approval” and “ready to settle” describe different points in a lending process, while the business sale contract determines what the buyer has promised to achieve by the finance date. An approval can still depend on valuation, satisfactory security, lease or franchisor consent, evidence of funds, guarantees or other conditions. Your solicitor should confirm whether the approval you actually have is enough for the clause you actually signed.
The wording and operation of a finance clause are legal questions. If the deadline is approaching without the required position being achieved, the buyer's options depend on the contract and may include seeking an extension or giving the notice the clause requires. Do not assume the date simply passing protects the buyer; get the clause read and diarised when the contract is signed.
What happens to the deposit if finance is not approved?
There is no Australia-wide rule that makes a business-purchase deposit automatically refundable just because finance falls over. The answer depends on the contract, the wording of any finance or due-diligence condition, whether the buyer complied with that condition and whether the required notices were given on time. Treat the deposit position as a contract question before signing, not as something to work out after a lender declines the deal.
Where mainstream timing genuinely cannot meet an otherwise sound transaction, shorter-term private lending or caveat lending may be considered against suitable security, but the refinance or other exit should be established before the short-term facility is drawn.
From our broking, indicative
Drawn from Switchboard broking experience across Australian business acquisitions, as at 19 August 2026, the things that most often consume the available finance-clause time are:
- The buyer starts assembling the file after signing rather than before
- The vendor is slow to release financials or lodged activity statements
- The landlord, franchisor or another third party does not respond quickly
- A valuation or security issue is identified late
- The purchase structure changes after the lender has started assessing it
Indicative only, based on deals we have placed, and qualitative rather than quantified. This is not a quote and not an offer. Timeframes vary by lender and transaction. The wording and operation of a finance clause are legal questions for your solicitor. Not financial advice.
Why do loans to buy a business get declined?
In our broking experience, acquisition applications often fail because the file does not explain how the earnings, ownership, security and working capital will survive the transaction. Many of those risks are visible before an application is lodged and can be addressed before the lender has to guess.
The recurring theme is transferability. A credit team is not asking whether the business has been profitable; the accounts already answer that. It is asking whether the profit belongs to the business or to the person leaving it, and whether the buyer arriving can hold it. When the file cannot answer that, the application does not fail on a number, it fails on an unanswered question.
From our broking, indicative
Drawn from Switchboard broking experience across Australian business acquisitions, as at 19 August 2026, these are the reasons acquisition applications are declined most often, in the order we see them:
- The buyer has no industry experience in the sector they are buying into
- The vendor's financials do not reconcile to the lodged activity statements
- Goodwill is concentrated in the departing owner's personal relationships
- No working capital allowance has been made for after settlement
- The lease has too little term remaining to cover the loan
Indicative only, based on deals we have placed, and qualitative rather than quantified. This is not a quote and not an offer. Outcomes vary by lender and by deal, and actual terms depend on lender policy and your circumstances at the time of application. Not financial advice.
Four of those five are addressable before you apply. Industry experience can be supplemented by retaining a manager or agreeing a handover period with the seller. Reconciliation problems can be investigated and explained, and sometimes they are genuinely innocent. Working capital can be sized and funded properly rather than hoped for. A short lease can often be extended or an option exercised before exchange, and it is worth doing that first because it is the cheapest fix on the list.
The fifth, goodwill concentrated in the departing owner, is the hard one, and it is usually solved by changing the structure rather than the file: a longer handover, a staged payment, or a deferred component tied to retention. Where a funding gap remains after all of that, a seller contribution is the usual answer, and the mechanics are in the vendor finance guide. If the underlying issue is that the price does not stand up to an independent view, going concern valuation explained covers how the number is actually arrived at.
What does buying a business cost beyond the price?
Beyond the purchase price you should expect duty where property or dutiable assets are involved, legal and accounting fees for due diligence and contracts, lender and broker costs, and the working capital the business needs from settlement day. These are rarely quoted together, and buyers who budget only for the price and the deposit are the ones caught short at settlement.
The three that cause the most trouble are set out below. None of them is optional and none of them is a small number on a substantial deal.
GST and going concern
The sale of a business as a going concern can be GST-free where the required conditions are met. The Australian Taxation Office states that no GST is payable on the sale of a going concern if certain conditions are met, with the detailed requirements set out in the relevant ruling rather than on the page itself. The conditions are technical, they must be satisfied on the facts of your transaction, and the parties generally have to agree in writing before settlement that the supply is of a going concern. Verified against the ATO on 19 August 2026; check the current position with your accountant before relying on it.
This matters to funding, not just to tax. Where the sale is not GST-free, the GST component has to be paid at settlement and reclaimed later, which is a real cash requirement in the interim that your facility may or may not cover. Get the treatment confirmed early. The concept itself is covered in the going concern glossary entry and in more depth in going concern explained.
On the seller's side, the small business capital gains tax concessions may apply. Eligibility runs through either a small business entity test, which the ATO puts at an aggregated turnover of less than 2 million dollars, or a maximum net asset value test under which the total net value of the relevant CGT assets must not exceed 6 million dollars. Both ATO pages were verified on 19 August 2026; the ATO states that the 6 million dollar net asset limit is not indexed. This is the seller's question rather than yours, but it shapes what a vendor will accept, so it is worth knowing.
Do you pay stamp duty when you buy a business in Australia?
There is no single Australia-wide stamp duty rule for buying a business. Duty is imposed by the states and territories and depends on the assets and rights being transferred. Where real property forms part of the transaction, property transfer duty is a major cash item: Revenue NSW states that property transfers generally attract transfer duty in New South Wales, while Victoria applies land transfer duty to acquisitions of land. Both authority pages were checked on 19 August 2026.
The treatment of the non-property components of a business sale, goodwill among them, differs between jurisdictions and has changed over time in several of them. Do not carry an assumption across a border. Get the position confirmed for the specific state by your solicitor before you exchange, because duty is payable in cash on a deadline and is not something a lender will typically fund after the fact.
Legal and due diligence cost
Budget for a solicitor to review and negotiate the contract, an accountant to examine the financials, and searches across the securities register, the lease and any licences. On a business of any size this is not a token cost, and it is the wrong place to economise: the money spent finding a problem before exchange is trivial against the cost of inheriting it.
There is also a newer factor to plan for. The Anti-Money Laundering and Counter-Terrorism Financing Amendment Act 2024 commences in stages: Schedules 1, 2 and 3 commenced on 31 March 2026, and Schedule 4 commenced on 1 July 2026, bringing a range of previously unregulated professions into the regime. Verified on 19 August 2026 against the Federal Register of Legislation, which shows the relevant 31 March 2026 and 1 July 2026 commencement stages. In practical terms, the professionals sitting inside a business sale are now subject to customer identification and reporting obligations they were not subject to before, which means more verification, earlier, from more parties. Allow for it in the timeline rather than discovering it a week out from settlement. Settlement sequencing on going concern deals is worked through in the pub and hotel going concern settlement guide.
How much working capital do you need after buying a business?
You need enough working capital to cover the cash leaving the business before the cash that belongs to you starts arriving. On most acquisitions that means modelling at least one full operating cash cycle rather than choosing a round number or relying on the seller's bank balance.
A practical starting formula is: payroll + super + rent + supplier payments + stock replenishment + tax and one-off takeover costs due before collection, less the cash and receivables that actually transfer to you and are collectible in that period. Then stress the timing. If customers pay later, suppliers shorten terms or stock has to be replaced faster than expected, the buffer needs to absorb it.
The timing mismatch is structural. Wages continue on the existing payroll cycle. Rent may be payable in advance. Suppliers may want new credit terms with the buyer. Stock has to be replaced before the next sale. Some receivables on the books at settlement may belong to the seller under the contract, so an impressive debtor ledger does not automatically mean cash is available to the buyer.
Payday Super, in effect from 1 July 2026, changes this cash profile further. Super guarantee is now tied to payday rather than the former quarterly rhythm, so a buyer taking over employees inherits a faster super cash cycle. The ATO says contributions generally need to reach the employee's super fund within seven business days after payday, subject to limited extended timeframes. See the ATO Payday Super guidance.
Size the requirement before settlement and include it in the funding request. A business loan or working-capital facility arranged with the purchase is a different credit conversation from emergency liquidity requested after the acquisition has already settled. The first ninety days are mapped in cafe working capital in the first 90 days after takeover.
What happens immediately after settlement?
The finance problem does not end when the vendor is paid. The buyer now has to make the operating business continuous: banking and payment access, payroll and super, supplier accounts, insurance, licences and registrations, employee arrangements, stock and the handover of systems, passwords, contracts and customer channels. Any one of those can become a cash-flow problem if it is left until settlement day.
Employee transfer deserves specific attention. Fair Work says a transfer of business can affect which employee service and entitlements the new employer must recognise, and the treatment can differ between annual leave, redundancy, long service leave, notice and other entitlements. Read the Fair Work transfer-of-business guidance and have the employment position documented before the final settlement adjustments are agreed.
Australian Government guidance also tells buyers to verify licences, permits, contracts, leases, inventory, liabilities and existing security interests during due diligence. That is not separate from finance: it determines what has to transfer cleanly for the cash flow the lender approved to exist after settlement. See the government buying-an-existing-business checklist.
A loan to buy a business is a transaction, not a single percentage. The lender has to support the maintainable earnings, goodwill, assets, buyer contribution, security, lease, valuation and working capital at the same time. Get the price split, documents and lease position clear before you sign away your finance flexibility, and model the first cash cycle as part of the acquisition rather than as a problem for the new owner to solve afterwards.
Key takeaway: The lender is asking two questions at once: will the earnings still be there after the seller leaves, and can the whole transaction settle without starving the business of cash?If you are already looking at a specific business, the useful finance conversation starts with the deal rather than the advertised rate. Bring the target financials, lodged activity statements, contract or heads of agreement, lease, purchase-price split and your contribution so the funding gaps can be found before the contract deadlines find them for you.
Frequently Asked Questions
Yes. An existing business purchase can be financed in Australia, but acquisition funding is usually structured around the target business rather than treated like a generic business loan. Lenders assess the target's maintainable earnings, the split between goodwill and tangible assets, the buyer's contribution, the buyer's experience and the security available. See the Australian business loans guide for the wider assessment framework.
There is no fixed deposit percentage. The buyer contribution is the amount left after available debt, vendor finance or deferred consideration are deducted from the purchase price and the cash needed for acquisition costs and working capital. Goodwill-heavy purchases with limited outside security generally require more buyer equity than asset-backed deals.
A purchase with no cash contribution from the buyer is uncommon, but a deal can sometimes be structured where property equity, vendor finance or other acceptable security substitutes for part of the cash contribution. The lender still needs a credible funding stack and enough post-settlement cash flow to carry the debt.
Yes. Goodwill can be financed where the earnings supporting it are maintainable and likely to transfer to the buyer. Goodwill tied to recurring contracts, location, systems, staff, licences or a diversified customer base is easier to explain than goodwill tied mainly to the departing owner's personal relationships. See the goodwill glossary entry.
Yes, in some cases. A lender may rely on a general security agreement over the business, director guarantees, specific security over financed assets and the cash flow of the target. Options usually narrow as the price becomes more concentrated in goodwill or the earnings depend more heavily on the seller.
The core pack usually includes the contract or heads of agreement, recent target financials and lodged activity statements, the purchase-price breakdown, lease, asset and stock schedules, buyer experience and financial position, and a working-capital or handover plan. The exact pack changes with the industry, entity and security structure.
There is no reliable universal timeframe. The critical path usually includes assembling the file, credit assessment, any valuation, lease or third-party consents, lender conditions and the contract's finance deadline. The earlier those dependencies are identified, the less of the finance-clause period is spent discovering what the lender still needs.
A lower lender-supported value can reduce the amount available to complete the purchase. The buyer may need to contribute more equity, renegotiate the price, add acceptable security, move part of the consideration into vendor finance or an earn-out, or reconsider the transaction. The agreed price and the amount a lender will support are not the same thing.
Vendor finance means the seller leaves part of the purchase price outstanding and is repaid after settlement under agreed terms. It can fill a funding gap or keep the seller exposed to the outcome. The primary lender will usually want the vendor position documented around its own security and repayment rights. The mechanics are in the vendor finance guide.
Yes, in some transactions. Being a first-time owner or entering a new sector is not an automatic decline, but it increases the importance of transferable skills, experienced management, a credible operating plan and a strong seller handover. The lender is trying to establish that the target's earnings can survive the change of owner, not simply count how many businesses the buyer has owned before.
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