Who Actually Funds the Goodwill When You Buy a Business?
Business Owners Hub
Goodwill · Buying a business · What secures the loan
The hardest part of many business purchases is not financing the equipment or stock. It is financing the value you cannot pick up and resell. This guide explains who takes that goodwill exposure, how lenders decide whether the earnings survive the seller, how funding gaps arise, how much cash the buyer still needs around settlement, and what can stop the deal even after finance is approved.
Quick Answer
When you buy an Australian business, the goodwill is usually paid for from three sources: your own equity, acquisition debt sized against the earnings expected to survive the sale, and sometimes seller finance. A lender does not treat goodwill like equipment with a standalone resale value; it assesses the cash flow, security and transfer risk supporting the purchase. The amount you can borrow and the cash you still need are therefore separate questions.
Also called: business acquisition loan, business purchase loan, goodwill funding when buying a business. Goodwill is discussed in Australia as an accounting asset, a tax and legal concept, and a funding problem. This page is about the funding problem while using the accounting and legal sources where they settle a fact.
Start where you actually are
Most people reach this question part way through a purchase rather than at the beginning. Pick the line that matches what has just happened in your deal.
- You are looking at a listing and wondering why so much of the price is goodwill. Start with who actually pays for it.
- You want to know whether the customers, contracts and earnings will still be there after the seller leaves. Go to transferability.
- You are trying to work out the deposit and the total cash you need at settlement. Go to the buyer cash section.
- The lender's number came back below the agreed price, or you think the shortfall means you are overpaying. Go to the funding gap.
- You have already signed and the finance date is running. Go to the contract timing intercept.
- You are being asked for a personal guarantee or property security. Go to what the lender may take from you.
- You have been declined and want to know whether another lender will really change the answer. Go to what causes a decline.
- You are the seller and the buyer cannot fund the goodwill. Go to the seller's options.
Who actually funds the goodwill when you buy a business?
Goodwill in an Australian business purchase is usually paid for from three sources: the buyer's equity, acquisition debt sized against transferable earnings, and sometimes the seller through vendor finance or another form of deferred consideration. A lender does not treat goodwill like equipment with a standalone resale value. It decides how much exposure it will take by looking at the earnings, the security available and the risk that the value disappears when the seller leaves.
The word itself covers value that is real but intangible. business.gov.au lists examples such as customer relationships, brand recognition, staff performance, customer lists, reputation and operating procedures, and says there is no single valuation method. In accounting, the current Australian standards describe recognised goodwill as future economic benefits arising from other acquired assets that are not individually identified and separately recognised. Those definitions explain why the funding question is different from financing a vehicle, machine or freehold.
Different lender types can take that exposure in different ways. The table below is a market map, not a universal credit policy: every lender can set its own limits and the same lender can treat two acquisitions differently.
| Funding source | Typical role | What supports the exposure | What commonly limits it |
|---|---|---|---|
| Major trading banks | Can fund an acquisition that includes goodwill where the overall file fits policy | Verified earnings, a general security position over the business and, on many files, real property or other tangible support | Cash flow, industry policy, buyer contribution, security and the amount of value that depends on one person |
| Specialist professional-practice lenders | Can be materially more comfortable with goodwill inside the professions they specialise in | Recurring fee or patient income, retention history, buyer credentials and the economics of the practice | Profession, buyer experience, concentration and the lender's specialist policy. See practice finance |
| Non-bank and cash-flow acquisition lenders | May take more earnings-based exposure where bank security settings do not fit | Demonstrated cash flow, maintainable earnings, business assets, guarantees and the transaction structure | Serviceability, industry appetite, term, customer concentration, buyer contribution and transfer risk |
| Property-backed or private lenders | Can sit behind a purchase where the credit case is driven primarily by real property and a clear exit | The property and the exit strategy more than the goodwill itself | Available equity, ranking, exit and the lender's property policy |
| Seller finance | The seller leaves part of the purchase price outstanding after settlement | The seller's own view of the business and the contractual rights agreed with the buyer | Senior-lender consent, ranking, repayment timing and whether the seller needs the full price at settlement. See vendor finance when buying a business |
| Buyer's own equity | Absorbs the part of the price that debt does not cover | No lender security is required because it is the buyer's money | The buyer still needs enough cash left for costs, adjustments and working capital after settlement |
Indicative market structure from Switchboard broking experience as at September 2026. It is not a statement of any lender's published credit policy or an approval guide.
The useful question is therefore not “which lender lends against goodwill?” in isolation. It is “which lender will take this much intangible exposure against these earnings, this buyer and this security package?” The broader acquisition assessment belongs in our loan to buy a business guide; this page stays on the goodwill part of that decision.
What does goodwill mean in Australia?
In Australia, goodwill has accounting, tax and practical business meanings that point to the same underlying idea. The current AASB material describes goodwill recognised in a business combination as an asset representing future economic benefits from other acquired assets that are not individually identified and separately recognised, and AASB 136 states that goodwill does not generate cash flows independently of other assets or groups of assets. The Australian Taxation Office's TR 1999/16 describes goodwill as an indivisible item of property that attaches to the business and cannot be dealt with separately from the business with which it is associated. business.gov.au gives the practical examples: customers, brand, staff, reputation, lists and procedures.
That distinction matters for funding. Goodwill is an asset, but it is not an asset a lender can simply remove from the premises and sell. Its value depends on the business continuing to produce the customers, cash flow and operating advantages that created it.
How does a lender decide whether the goodwill will survive after the seller leaves?
A lender decides whether goodwill is fundable by asking how much of the business's earnings belong to the business itself and how much depends on the person selling it. Customers, staff, contracts, systems, premises and recurring revenue that remain after settlement support the goodwill; earnings built around the seller personally are much harder to fund.
This is why two businesses with the same sale price can produce very different credit outcomes. Where the earnings sit in systems, contracts, a transferable lease, licences and a team, they can travel with the business. Where they sit in one person's relationships, reputation or technical work, they can walk out on settlement day. Maintainable earnings and buyer capability are covered in the parent business acquisition guide; here the focus is what makes the goodwill transferable.
| Source of earnings | More transferable | More seller-dependent |
|---|---|---|
| Customers and revenue | Recurring contracts or fees, repeat customers and revenue spread across many names | A few customers dominate revenue, or the relationship is personal to the seller |
| Premises | A lease that can be assigned and has useful term remaining | A short or month-to-month arrangement, or a landlord who has not agreed to the transfer |
| Licences and approvals | Rights that remain with the business or can be transferred to the buyer | Approvals tied to the seller's personal accreditation or a consent that has not been obtained |
| Brand and referrals | A trading name, digital presence and referral process that customers associate with the business | The seller's personal reputation or name is the main reason work arrives |
| Systems and know-how | Documented pricing, processes, CRM data and operating procedures that staff can follow | Undocumented know-how or pricing judgement carried in the seller's head |
| People | Key staff stay through the handover and customer relationships are spread across the team | Key employees intend to leave, or the seller personally delivers the work customers are buying |
| Handover and restraint | A documented transition period and appropriate sale-contract protections reviewed by the buyer's solicitor | No meaningful handover, or the seller can immediately compete for the same customers |
Professional practices are an important exception to the general SME pattern. Where lenders have specialist policy and long experience with a profession, they may be materially more comfortable with recurring fee or patient income and a transferable client base than a general lender would be with an ordinary owner-dependent trading business. That is why a practice purchase should be assessed in the professional-practice lending lane, not by copying assumptions from a general business purchase.
How much of the goodwill will an Australian lender fund?
There is no universal percentage of goodwill that an Australian lender will fund. The amount depends on the maintainable earnings expected after the sale, the buyer's experience, the security available, customer and key-person risk, the lease or franchise position and the lender's own policy. Specialist professional-practice lending can operate differently from the general small-business market, so a single headline percentage is more misleading than useful.
| What changes | Why it matters to the lender |
|---|---|
| Maintainable earnings | The facility is sized against earnings the lender can verify and expects to continue after the seller leaves, not simply against the price in the sale contract.Switchboard practitioner point, not a published lender statistic |
| Buyer contribution | The contribution absorbs the part of the purchase the lender is not prepared to carry and affects the buyer's leverage after settlement.Treatment varies by lender and transaction |
| Property or other tangible security | Additional security can move the transaction into a different credit lane because the lender is no longer relying only on an intangible business value.Security does not repair weak earnings; it changes the recovery position |
| Customer and key-person concentration | The more revenue depends on a small number of customers or on the seller personally, the less confidence a lender can have that the earnings transfer. |
| Lease, licence or franchise term | The lender needs the rights that support the earnings to survive long enough for the debt structure to make sense. |
| Buyer experience | A buyer with relevant operating experience can reduce execution risk; a first-time operator in a complex trade can increase it. |
The contract's price split still matters. Land, plant, stock and goodwill are different assets and can have different legal, tax and duty treatment as well as different funding treatment. Revenue NSW's current DUT 033v2 expressly gives a business sale example where goodwill, intellectual property and stock-in-trade are not dutiable property while fixtures and moveable goods can be; Victoria's current sale-of-business evidence requirements likewise ask for a breakdown of values attributed to plant and equipment and goodwill where land and business are transferred together. Those are duty rules, not lending rules, but they are another reason the allocation should come from the transaction advisers rather than be invented for a finance application.
| Change in the deal | Typical direction | Why |
|---|---|---|
| Higher purchase price for the same maintainable earnings | More buyer or seller funding is usually needed | The debt still has to be serviced by the same underlying earnings |
| A market salary deducted for work the seller currently performs | Can reduce debt capacity | Part of the apparent profit may be payment for the owner's labour rather than transferable business earnings |
| Additional real property security | Can widen lender choice or structure | The recovery position is no longer limited to the business and its intangible value |
| Short lease or uncertain transfer consent | Can reduce appetite or available term | The right to occupy the premises may end before the debt is repaid |
| Strong buyer experience and a documented handover | Can improve the credit case | It reduces the risk that earnings fall simply because ownership changes |
Is there an official Australian deposit or goodwill-funding percentage?
No universal Australian government or industry figure that we could verify sets the buyer contribution or the percentage of goodwill a lender will fund on a business purchase. The usable number comes from the earnings, security, buyer and lender policy on the specific transaction. That is why this page does not publish a generic deposit or goodwill percentage.
| Question | Where we looked | What we found |
|---|---|---|
| A universal buyer deposit or equity expectation for purchasing a trading business | business.gov.au, ASBFEO, ASIC, the Australian Banking Association, the RBA, the ABS and public lender material | No universal official figure on point. The figures we located were published by commercial participants rather than by a regulator setting a market rule. |
| A universal percentage of goodwill that an Australian lender will fund | Government, regulator and public industry material plus the lender sources surfaced in the AI query run | No universal official percentage on point. Public guidance instead describes valuation, security, business acquisition and lender-specific assessment. |
Method: structured Australian web and AI-retrieval research completed 3 September 2026. This records what that research returned; it is not a claim that no source can exist anywhere.
How much cash do you actually need to buy a goodwill-heavy business?
Your buyer contribution on a business sold as a going concern is not necessarily the total cash you need. Before settlement, work out the amount you must contribute to the purchase, any stock or settlement adjustments, professional and lender costs, lease or franchise costs, and the working capital the business needs after you take control. Using every available dollar to close a goodwill shortfall can leave an otherwise viable acquisition short of cash on its first day.
| Cash requirement | What it pays for | Why it matters |
|---|---|---|
| Buyer contribution | The part of the acquisition the debt structure does not fund | Closes the purchase-price funding gap |
| Stock and settlement adjustments | Inventory and other amounts adjusted at completion under the sale contract | They can sit outside, or move separately from, the headline business price |
| Professional and finance costs | Legal, accounting, valuation, lender and other transaction costs that apply to the deal | They still require cash even though they do not buy goodwill |
| Lease, franchise and transfer costs | Costs or conditions connected with assignment, consent, documentation or required works | The funding can be approved while a third-party transfer condition is still unresolved |
| Working capital | Wages, suppliers, rent, tax, stock replenishment and ordinary operating expenses after settlement | The business needs liquidity immediately after ownership changes; the purchase facility does not automatically provide it |
| Contingency | Delays, slower collections, customer churn or one-off transition costs | It protects the business while the buyer learns the operation and the seller exits |
The dangerous calculation is “I have enough cash to settle, therefore I have enough cash to buy the business.” They are not the same test. If increasing your contribution would consume the money needed to pay wages, suppliers and tax after settlement, the funding gap has not really been solved; it has been moved into the operating account.
The parent business acquisition guide covers the broader serviceability and documentation process. This section exists only to stop the goodwill shortfall from consuming the cash the buyer needs after the keys change hands.
If the lender will not fund the full price, does that mean you are overpaying?
Not necessarily. A lender can stop below the purchase price because of its goodwill policy, security position, industry appetite, buyer contribution, customer concentration or assessment of the transferable earnings. But if the lender has reduced the amount because the maintainable earnings do not support the requested debt, that is a reason to revisit the price rather than simply assume another lender will fund more.
A lower loan amount is not automatically a valuation of the business. It is the amount that lender is prepared to expose against that business, buyer and security structure. Find out what caused the shortfall before deciding how to fill it: a policy or security problem can sometimes be solved by a different structure; an earnings problem usually cannot.
| Response | What it changes | When it fits, and what to watch |
|---|---|---|
| Increase your own contribution | Closes the gap immediately | Only works if it leaves enough working capital after settlement. Do not solve the acquisition by starving the operating business. |
| Ask the seller to finance part of the price | Moves part of the payment beyond settlement | Senior-lender treatment matters, and seller debt does not automatically count as buyer equity. See vendor finance when buying a business. |
| Offer property or other additional security | Changes the lender's recovery position and can change the lane the deal sits in | It does not repair weak earnings and it puts a real asset behind a business risk. See property as security for a business loan. |
| Renegotiate the price | Reduces the amount that has to be funded | Most relevant where the maintainable earnings, rather than lender policy, are the reason the requested debt does not work. |
| Use deferred or performance-linked consideration | Moves some price risk back to the seller and can make part of the payment depend on later results | This is contract structuring, not merely finance. The Board of Taxation uses “deferred consideration” as a broad concept covering future payments that may depend on financial performance, milestones or other contingencies. Tax and drafting consequences belong with the accountant and solicitor. |
| Walk away | Ends the exposure | Whether you can do that without losing a deposit or breaching the contract depends on what you signed. Ask your solicitor before the contractual deadline passes. |
One pattern deserves particular attention. Buyers often respond to a shortfall by searching for a lender that will simply provide a bigger number. Sometimes lender appetite genuinely differs and that is the right move. Sometimes the second lender is pricing the same risk the first lender found. The question to answer first is: what changed in the deal between application one and application two?
Can the seller finance the goodwill the lender will not fund?
Yes, a seller can agree to leave part of the purchase price outstanding instead of receiving everything at settlement. That can be structured as vendor finance, deferred consideration or, in some deals, a payment that depends on future performance. It can bridge a goodwill funding gap, but it is not automatically treated as the buyer's deposit or equity and the senior lender needs to understand the arrangement before settlement.
Ask the senior lender four questions early: whether seller finance is permitted, whether the seller can take security, how any seller security must rank behind the senior lender, and whether seller repayments must be deferred while the senior facility is outstanding. Those are lender-policy questions. The sale agreement, subordination documents, earn-out mechanics and tax treatment are matters for the solicitor and accountant.
What if you have already signed and finance is not approved?
If you have already signed subject to finance, check the finance-condition date before approaching another lender. The contractual deadline and the lender's assessment timetable are separate clocks, and obtaining finance after your contractual rights have changed may not solve the problem.
What the clause requires, whether an extension can be requested, what happens if the date passes and what happens to the deposit are questions about the contract you signed. Get your solicitor across them before the deadline, not after it. The broader contract mechanics belong in our guide to buying a business with property versus without; this page is only the funding intercept.
What can a seller do when the buyer cannot fund the goodwill?
If the buyer's finance falls short, first work out whether the problem is the buyer, the lender's policy, the security structure or the earnings supporting the price. A second buyer may face the same problem if the earnings depend on the seller personally or the price is difficult to support after a market salary is allowed for the owner's work.
The seller's practical options are to finance part of the price, agree to deferred or performance-linked consideration, reprice the deal, improve the transfer evidence and try again, or find a buyer whose experience or security produces a different credit outcome. A seller carry can be a strong signal that the seller believes the earnings will transfer, but it also leaves the seller exposed after control has passed. That risk deserves legal and accounting advice, not just a finance conversation.
Can goodwill itself be given as security, and what does a lender recover?
A security agreement can include goodwill as intangible personal property, but that does not turn goodwill into something a lender can repossess and sell like equipment. The legal security position and the practical recovery value are different questions, which is why lenders still focus so heavily on the business as a continuing cash-flow operation.
| What is settled | Where it sits | Source, and as at |
|---|---|---|
| Personal property is defined by exclusion, and goodwill is not among the exclusions | Section 10 | Personal Property Securities Act 2009 (Commonwealth), compilation C2024C00719, as at 14 October 2024 |
| The collateral class a registration touching goodwill is made against | Intangible property | Personal Property Securities Act 2009 (Commonwealth), compilation C2024C00719, as at 14 October 2024 |
| Goodwill is indivisible, and inseparable from the business it attaches to | Paragraphs 12 and 14 | Australian Taxation Office, Taxation Ruling TR 1999/16, as at 28 November 2001 |
| What the registry's own enforcement illustration is about taking back | Goods | Australian Financial Security Authority, Personal Property Securities Register, read as at September 2026 |
General information only, not legal advice. Whether a particular security agreement reaches a particular asset is a question about that document.
Start with the Act. Section 10 of the Personal Property Securities Act 2009 (Commonwealth) defines personal property as property, including a licence, other than land, and other than a right, entitlement or authority that is granted by or under a law of the Commonwealth, a State or a Territory and declared by that law not to be personal property for the purposes of the Act. That is a definition by exclusion, and goodwill is not among the exclusions. The same section names the class it sits in: intangible property means personal property, including a licence, that is not financial property, goods or an intermediated security. So a security interest can reach the goodwill, and a registration touching it is made against the intangible property class rather than against goods. Read from compilation C2024C00719, compilation date 14 October 2024. This is general information only and not legal advice, and whether a particular security agreement reaches a particular asset is a question about that document.
Now the other half. The Australian Taxation Office's ruling TR 1999/16, at paragraphs 12 and 14, describes goodwill as an indivisible item of property that is legally distinct from the sources from which it emanates, that attaches to a business and is inseparable from the conduct of that business, and states that it cannot be dealt with separately from the business with which it is associated. Published 28 November 2001, and its status was confirmed current when it was read for this page. That is a tax characterisation, not a lending rule. The lending consequence we draw from it, that there is nothing standing on its own for a secured party to realise, is our reading as brokers and is not the tax office's position.
Put the two together and the practical answer appears. The security reaches an asset with no standalone realisable value. The Australian Financial Security Authority's guidance on enforcing your security interests, read for this page in September 2026, says a registered security interest may allow a secured party to claim collateral from the grantor to cover all or part of the debt it secured, and that where the grantor becomes bankrupt or insolvent the secured party claims through the insolvency practitioner. Its worked illustration is supplying goods to a customer on written terms and being entitled to take the goods back. Every practical example the registry gives is something that can be picked up and repossessed, which is exactly what goodwill is not. That page states it provides general information only and advises legal advice on your own situation before any enforcement action, and that caveat travels with the fact.
The practical point is narrower than the PPSR rules themselves. AASB 136 states that goodwill does not generate cash flows independently of other assets or groups of assets, while the ATO describes it as inseparable from the business with which it is associated. A lender can therefore take a security position that includes goodwill, but the recovery strategy is normally about preserving or selling the business and its assets as a functioning whole, the walk in walk out sale a lender pictures, rather than “repossessing the goodwill” on its own. The detailed rules about a general security agreement and what lenders can take belong in the separate security guide.
Do you have to give a personal guarantee to fund goodwill?
Many business-acquisition lenders require a director's guarantee. Whether property security is also required depends on the lender, the size and transferability of the goodwill, the strength of the cash flow and the other collateral available. A guarantee and a mortgage are different legal commitments, so they should not be treated as interchangeable versions of the same security.
A director's guarantee is a personal promise given by the people behind the borrowing entity. It can expose the guarantor personally if the borrower does not meet the guaranteed obligations, which is why the effect of the document matters more than the fact that guarantees are common in business lending. Ask the lender what is required, then have your solicitor explain what the actual document binds before you sign it.
Property is a separate layer. Some acquisitions are funded without property security; others only become workable when residential or commercial property is added behind the facility. Adding property can widen lender appetite, but it also changes the buyer's downside because a real asset now stands behind a business risk. Our guide to using the family home as security for a business loan covers that decision in detail, and using someone else's property as security covers third-party property.
A broker can explain why a lender is asking for a guarantee or mortgage and whether a different lender structure may change the request. Only a lawyer can advise what the legal document means for you. Have the documents reviewed before signing.
How is goodwill funded differently when you buy a franchise?
For a franchise purchase, the lender assesses both the individual site and the franchise system. The remaining franchise term, renewal position, franchisor consent and site economics can materially affect how much of the purchase can be funded and how the loan is structured, because part of the goodwill depends on a right granted by the franchisor rather than on a brand the buyer owns outright.
The ACCC's current transfer guidance is unusually useful here. It says a franchisee selling before the end of the agreement must ask the franchisor for consent, that the franchisor cannot unreasonably withhold consent, and that the brand belongs to the franchisor. The ACCC also explains that what the seller is really transferring is the right to operate the business under that brand, and that the value of an existing franchise business can reduce over time. Those are franchise-law facts, not lender policy, but they explain why the agreement term and transfer consent matter to credit. The Code sets the timing on the other side of the deal as well: the ACCC states that a franchisor must give prospective franchisees a copy of the disclosure document at least 14 days before a franchise agreement is signed, which is why a buyer should have read it before finance is arranged rather than while it is being assessed.
The buyer still needs the ordinary acquisition evidence: accounts, bank statements, maintainable earnings, buyer experience and the lease. The franchise layer adds the franchise agreement, current disclosure material, the transfer process and whatever conditions the franchisor places on the buyer. Finance approval by itself does not complete those third-party steps.
| What is assessed | Independent business | Franchise or licensed brand |
|---|---|---|
| Trading history | The seller's business, location, customers and accounts | The individual site plus the broader system and the buyer's fit with that system |
| Key documents | Accounts, bank statements, lease, contracts and sale documents | The same, plus the franchise agreement, disclosure material and transfer or consent requirements |
| What can constrain the loan term | The earnings profile, lease and lender policy | The same factors plus the remaining franchise rights and renewal position |
| What the buyer controls | The business's own brand and customer relationships, subject to the sale documents | The right to trade under a brand that belongs to the franchisor and is governed by the franchise agreement |
Franchise goodwill a lender can understand more easily
- Useful agreement term and renewal position documented
- Transfer or franchisor consent process started early
- Site accounts reconcile and network information supports the operating model
- Lease and franchise rights align well enough for the proposed debt structure
- The buyer meets the franchisor's and lender's capability requirements
Franchise goodwill that can stall a file
- Short remaining agreement term with uncertain renewal
- Transfer consent left until late in the finance process
- Required refurbishment, transfer conditions or site issues not budgeted
- Weak site trading hidden by assumptions about the strength of the brand
- Lease and franchise rights that expire or transfer on incompatible terms
What makes a lender decline a goodwill-heavy business purchase?
In Switchboard's broking experience, goodwill-heavy acquisitions most often become difficult when the earnings do not look sufficiently transferable after the seller leaves, or when the debt requested is too large for the maintainable earnings and security structure. That is practitioner experience, not an industry approval statistic, and the order can differ by lender and transaction.
What improves the credit case
- Earnings that still work after a market salary is allowed for the owner's role
- Revenue spread across customers rather than concentrated in a few relationships
- Recurring contracts, fees or repeat demand that can be evidenced
- A transferable lease, licence or franchise position
- Key staff and systems that remain after settlement
- A buyer with relevant operating experience
- Accounts and bank statements that reconcile without unexplained adjustments
What commonly weakens or stops it
- The seller personally owns the customers, referrals or technical work
- The price requires debt the maintainable earnings do not support
- One or two customers account for a large part of revenue
- The lease, licence or franchise transfer is short, uncertain or incomplete
- Important staff are leaving with the seller
- The buyer has limited relevant operating experience and little security support
- Large add-backs or adjustments cannot be evidenced
Are you buying a business, or buying the seller's job?
If most of the profit exists because the seller works in the business without a market salary, personally owns the major customer relationships or performs work that a replacement employee would have to be paid to do, part of the apparent profit is the seller's labour rather than transferable business earnings. A lender can adjust for that before deciding how much debt the business can support.
The more customers, staff, systems, contracts and recurring revenue continue without the seller, the more the goodwill behaves like transferable business value rather than the price of replacing the owner's job.
From our broking, indicative
The practical value of a decline is identifying which part of the file failed. Different causes leave different next moves.
- Seller-dependent earnings. Another lender may reach the same conclusion unless the transfer evidence or deal structure changes. This can become a repricing or walk-away conversation.
- Debt too large for maintainable earnings. Repricing, more buyer equity or seller participation can change the maths; better presentation alone does not.
- Lease or third-party consent problem. Sometimes fixable if the landlord, franchisor or licensor is approached before the finance deadline becomes critical.
- Buyer-experience problem. Hard to fix inside a short settlement window, but relevant experience, management support or additional security can change how some lenders view the risk.
- Thin security. A different lender may still work on cash flow, but adding property, seller finance or a larger contribution can materially change the available structure.
Indicative only. Drawn from Switchboard broking experience across Australian business acquisitions as at September 2026. It is not an approval statistic, quote or lender policy statement. Actual outcomes depend on the lender and the transaction.
The slowest item in the chain is not always the lender. A valuation, landlord consent, franchise transfer or missing seller information can be what pushes a deal into its contractual deadline. That is why the transaction map at the end of this page separates the funding job from the solicitor, accountant, landlord and franchisor jobs.
Can you buy a goodwill-heavy business without property security?
Yes, some Australian business acquisitions can be funded without property security, but a goodwill-heavy purchase with no buyer contribution as well is much harder. Without real property behind the facility, the lender has to be comfortable with the transferable cash flow, the business security, the buyer and the amount of leverage in the transaction.
Depending on the deal, the structure may rely on a general security agreement over the business, director guarantees, cash-flow lending, specialist acquisition policy and a meaningful buyer contribution. Vendor finance can also close part of the gap. What is realistic depends on the business and lender; there is no universal “no property” or “no deposit” rule.
If a buyer has neither property security nor enough cash to contribute while still preserving working capital, the realistic levers are a smaller acquisition, seller participation, a different transaction structure or more equity. The useful test is not whether somebody advertises an unsecured facility. It is whether the whole purchase and post-settlement cash requirement can be funded without creating a business that is overleveraged on day one.
| Where you are | What has to happen next | Who owns the job |
|---|---|---|
| Before the offer | Test whether the earnings survive the seller and understand what is being paid for as goodwill, stock, equipment and other assets | Buyer + accountant |
| Offer or sale contract | Understand the finance, due-diligence, lease, franchise and other conditions before the deadlines start running | Solicitor + buyer |
| Finance assessment | Provide the business financials, buyer background, security position and transaction documents the lender needs | Buyer + broker/lender |
| Lender offers less than the agreed price | Identify whether the shortfall is caused by earnings, lender policy, security, buyer contribution or the price itself | Broker/lender + accountant + buyer |
| Funding gap remains | Choose between more equity, seller finance, additional security, repricing, deferred consideration or walking away | Buyer + seller + advisers |
| Lease-dependent business | Complete the landlord consent or lease-assignment/new-lease process. In Victoria, the VSBC confirms that a business sale can involve a formal transfer or assignment process under the retail leasing rules. | Solicitor + landlord + seller/buyer |
| Franchise or licensed brand | Complete the franchisor or licensor transfer/consent process separately from the finance approval | Solicitor + franchisor/licensor + buyer |
| Before settlement | Confirm final funding, security documents, adjustments, third-party consents and the cash the buyer must bring | Broker/lender + solicitor + buyer |
| Day after settlement | Keep enough liquidity for wages, suppliers, rent, tax, stock replenishment and transition costs | Buyer + accountant |
If the purchase is still at the broad “can this acquisition be funded?” stage, start with the business acquisition finance guide. This page is the specialist answer when goodwill is the part of the price causing the problem.
Goodwill in an Australian business purchase is usually paid for from buyer equity, acquisition debt sized against the earnings expected to survive the sale, and sometimes seller finance. The lender is not deciding what goodwill is worth in isolation: it is deciding how much post-sale cash flow it will expose itself to, what security supports that exposure and whether the buyer will still have enough liquidity after settlement. If the debt comes in below the agreed price, first identify whether the cause is earnings, lender policy, security or transaction structure before deciding whether another lender, more equity, seller finance, repricing or a different structure is the right response.
Key takeaway: fund the deal around the earnings that survive the seller, and keep enough cash to run the business after settlement.Frequently Asked Questions
Business goodwill is the intangible value attached to a going business beyond separately identifiable assets such as plant, equipment and stock. It can reflect customers, brand, reputation, staff, systems and other advantages that help the business generate future economic benefits. For a buyer and lender, the important question is how much of that value and the earnings behind it will survive after the seller leaves.
Australian accounting standards describe recognised goodwill as future economic benefits arising from other acquired assets that are not individually identified and separately recognised. The ATO also describes goodwill as an indivisible item of property attached to the business, while business.gov.au gives practical examples such as customer relationships, brand, staff, reputation, customer lists and operating procedures. These are accounting, tax and practical descriptions rather than lender credit rules.
Goodwill is an asset when it is recognised in a business combination, but it is an intangible asset that does not generate cash flows independently of the other assets or business operations around it. That is why a lender can take a security position that includes goodwill while still treating the recoverable value very differently from equipment or real property.
Yes, borrowing to purchase an existing business is a standard Australian transaction, and it is usually more straightforward than borrowing to start one because there are trading accounts to assess. The lender sizes the facility against earnings it can verify rather than against the price you agreed with the seller, and the gap between those two figures is what you fund yourself. The parent guide to a loan to buy a business covers that assessment from end to end.
A business acquisition loan is finance raised to buy an existing business, assessed on the earnings the business can demonstrate rather than on the price agreed between buyer and seller. It is not a single product: a purchase with property behind it, a purchase assessed on earnings alone and a purchase part funded by the seller are three different files with three different lender lists. Ask a lender what it will treat as security on your deal, because that answer decides the terms far more than the name on the facility does.
How hard it is depends far more on what stands behind the loan than on the business itself. With earnings a lender can verify and property security available, an acquisition loan is a routine transaction. With earnings that exist only because the owner works unpaid, or with nothing securing the facility beyond the business being bought, it is difficult and sometimes not possible on terms worth taking. The most common cause of a decline is that the earnings justifying the goodwill turn out to belong to the seller rather than to the business.
For a general trading business, goodwill is normally funded inside a business acquisition or business purchase facility rather than as a standalone asset loan. The lender assesses the earnings, buyer, security and transfer risk behind the purchase. Specialist professional-practice lenders can be more comfortable with goodwill inside the professions they serve, which is why practice finance should be assessed separately.
There is no universal Australian government or industry deposit figure for buying a trading business that we could verify. The buyer contribution is the amount required by the actual transaction after the lender has assessed maintainable earnings, security, buyer experience, the purchase structure and its own policy. Also budget separately for stock or settlement adjustments, professional costs and working capital after settlement.
Not necessarily. A larger contribution can result from lender policy, the amount of goodwill, limited security, the industry, buyer experience or customer and key-person risk. But if the lender has reduced the facility because the maintainable earnings do not support the requested debt, that is a reason to revisit the price rather than assuming a different lender will automatically provide more.
Yes, a seller can agree to leave part of the purchase price outstanding through vendor finance or another deferred-payment structure. The senior lender needs to know about it, and the seller debt does not automatically count as buyer equity. Ask how any seller security ranks, when seller repayments can start and whether the senior lender requires subordination or other conditions.
Not every business loan requires property security. On a business purchase, a lender may take a general security position over the business, director guarantees and, depending on the transaction, real property or other collateral. The exact security package depends on the lender and the goodwill, cash flow and risk in the acquisition. See our guide to what lenders can take.
Yes, some acquisitions can be funded without property security, particularly where the transferable cash flow, buyer experience and overall leverage fit a lender's policy. A goodwill-heavy purchase with no property and no meaningful buyer contribution is much harder because the lender is carrying more intangible risk. Vendor finance, a smaller acquisition or more buyer equity can sometimes close that gap.
Professional-practice lending is a specialist market. Some lenders assess recurring fee or patient income, retention, practitioner credentials and the transferable client base differently from an ordinary owner-dependent SME. That can materially change the lender appetite and structure, so a practice purchase should be assessed through specialist practice-finance policy. See our practice finance guide.
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