Business Acquisition Finance

Financing the purchase of an existing business is one of the most complex files a broker handles.

Every deal involves a different mix of goodwill, tangible assets, vendor terms, and buyer equity, and the right structure means the difference between a deal that settles and one that stalls in credit.

We work with 50+ lenders to structure business acquisition loans that match the way your deal actually works, with terms that keep the business serviceable from day one.

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How Business Acquisition Finance Works

Business acquisition finance is a loan structured to fund the purchase of an operating business, a franchise, a professional practice, or a share in an existing company. Unlike standard business lending, the lender is not just assessing you as the borrower. They are assessing the business you are buying, the price you are paying, and whether the combined picture makes financial sense.

Most lenders evaluate acquisition deals around the target business's earnings. They look at normalised EBITDA (earnings before interest, tax, depreciation, and amortisation) over the past two to three years and assess whether the purchase price represents a reasonable multiple of those earnings. A business selling for four times EBITDA with stable revenue and strong client retention is a much easier approval than one selling at seven times with declining turnover.

The funding structure typically involves three components. Senior debt from a lender covers the largest portion, secured against business assets, goodwill, and sometimes property. Vendor finance is where the seller agrees to defer a portion of the purchase price, reducing the amount of bank funding required and signalling confidence in the business continuing to perform. Buyer equity makes up the balance, usually 20% to 40% of the purchase price depending on the strength of the deal.

Loan terms for business acquisition finance generally range from three to seven years, with some lenders offering up to ten years for larger transactions. Most are principal and interest, though interest only periods of 12 to 24 months are available from some lenders to help with cash flow during the transition period when the new owner is settling into operations.

What You Can Finance with Business Acquisition Finance

Business acquisition loans cover the full scope of what is involved in purchasing a business. This includes the goodwill component, which is often the largest portion of the purchase price for service businesses and professional practices. It also covers tangible assets like plant and equipment, fit out, vehicles, stock, and commercial property where the premises form part of the sale.

The most common application is buying a going concern, where you take over an operating business with its staff, customers, and contracts in place. Franchise purchases, where you buy into an established brand and operating system, are another frequent use. Partner buyouts require a different approach because the business is already running and the exiting partner needs to be paid out cleanly without disrupting operations. Professional practice acquisitions, including accounting firms, dental practices, physiotherapy clinics, and similar businesses, are valued differently because the asset is the client book and recurring revenue rather than physical equipment.

Working capital facilities can also be structured alongside the acquisition loan to ensure the business has enough cash flow headroom during the transition. Most businesses experience some disruption during an ownership change, and having a buffer prevents short term cash pressure from becoming a bigger problem.

Who Business Acquisition Finance Is For

First time business owners looking to buy into an established operation rather than starting from scratch are a common profile. Lenders are cautious with first time buyers, but a strong target business with clean financials and a willing vendor who supports the transition can offset the lack of prior ownership experience.

Existing business owners looking to expand by acquiring a competitor, a complementary business, or a second location use acquisition finance to fund the growth without draining cash reserves from their current operation.

Franchise buyers stepping into an established network need funding structures that align with the franchisor's requirements. Some franchise agreements include restrictions on security arrangements or require franchisor consent before any financial encumbrance is placed on the business assets, so the finance needs to be structured with those conditions in mind.

Partners or shareholders buying out the other party is one of the more nuanced applications. The business is already running, the valuation is often contested, and the exiting party's expectations need to be managed alongside what a lender will actually fund.

Management buyouts, where key employees purchase the business from a retiring or exiting owner, are also well suited. Lenders look favourably on these because the buyer already knows the business, the clients, and the operations, which significantly reduces transition risk.

Why Use a Broker For Business Acquisition Finance

Business acquisitions involve a level of deal structuring that most standard loan applications do not require. The broker's role is not just finding a lender. It is working out the right mix of senior debt, vendor finance, and buyer equity, then matching the deal to a lender whose credit appetite fits the specific characteristics of the business being purchased.

Different lenders have very different appetites for acquisition deals. Some will only lend against tangible assets and require property as additional security. Others are comfortable with goodwill heavy deals where the value sits in the client book and recurring revenue rather than physical equipment. A broker with access to 50+ lenders can place the deal with the right lender on the first approach, rather than going through multiple knock backs that waste time and risk the deal falling over.

Vendor finance negotiation is another area where a broker adds real value. Structuring a vendor finance component into the deal reduces the amount of senior debt required, lowers deposit pressure on the buyer, and often improves the terms the lender offers because it demonstrates the seller's confidence in the business. Not every buyer knows how to negotiate these terms, and not every accountant or solicitor involved in the transaction understands the lending implications.

Timing matters. Buyers who secure pre approval before signing the contract of sale are in a much stronger negotiating position than those who scramble for funding after committing. A broker can run preliminary assessments across multiple lenders early in the process, so you know exactly what you can access before you sign anything.

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Getting Business Acquisition Finance

Step 1: Deal Assessment and Pre Approval

Before you commit to a purchase, we review the target business's financials, assess the asking price against earnings, and run preliminary lender assessments to establish how much you can borrow and on what terms. This gives you a clear picture of your funding position before you sign anything. We will need the target's financial statements, BAS history, and a breakdown of the purchase price components.

Step 2: Structuring the Funding Package

Once the deal terms are agreed, we structure the full funding package. This includes the senior debt application, any vendor finance component, working capital facilities, and equipment finance where plant and equipment forms part of the purchase. We submit to the lender whose credit appetite best matches your deal, with a fully prepared application that addresses the key areas lenders scrutinise in acquisition files.

Step 3: Approval, Settlement, and Handover

After credit approval, we coordinate with your solicitor and the vendor's legal team to ensure the finance conditions align with the contract of sale. Settlement is managed to ensure funds are released on time and the transition is smooth. Most files settle within four to eight weeks from initial enquiry, depending on the complexity of the deal and the lender involved.

Frequently Asked Questions

How much can I borrow to buy a business?+

Most lenders will fund 50% to 80% of the purchase price of an established business, depending on the industry, the financial performance of the target, and the security available. The balance typically comes from buyer equity and vendor finance. Stronger businesses with clean financials and tangible assets attract higher funding ratios than goodwill heavy service businesses.

What is vendor finance and how does it work in a business acquisition?+

Vendor finance is where the seller agrees to defer payment of part of the purchase price, effectively carrying a portion of the sale as a loan to the buyer. This reduces the amount of senior debt required from a lender, lowers the deposit pressure on the buyer, and shows the lender that the vendor has confidence in the business continuing to perform. Terms are usually 12 to 36 months with an agreed interest rate.

Can I finance a business purchase that is mostly goodwill?+

Yes. Many businesses, particularly service businesses and professional practices, carry most of their value in goodwill rather than physical assets. Lenders who specialise in acquisition finance assess the quality of goodwill by looking at client retention, recurring revenue, contract length, and brand strength. Not every lender is comfortable with goodwill heavy deals, which is why broker access to the right lender panel matters.

Do I need industry experience to get a business acquisition loan?+

Lenders prefer buyers with relevant experience, but it is not always essential. If the target business has a strong management team staying on, if the vendor is providing a transition period, or if the buyer has transferable skills from a related industry, lenders can still get comfortable. First time buyers with no connection to the industry will find it harder and typically need a stronger financial position to compensate.

What deposit do I need to buy a business?+

Expect to contribute 20% to 40% of the purchase price as buyer equity, depending on the deal. Stronger businesses with tangible security and clean financials require less. Vendor finance can reduce the effective deposit requirement by covering part of the gap between the lender's contribution and the total purchase price.

Can I use my home as security for a business acquisition loan?+

Yes, and many buyers do. Offering property as additional security gives lenders more comfort and can improve the terms, including higher funding ratios and lower rates. However, some buyers prefer not to risk their home and choose lenders who will fund against business assets and goodwill only. Both options are available depending on the deal and your risk appetite.

How long does business acquisition finance take to arrange?+

From initial enquiry to settlement, allow four to eight weeks for a well prepared application. This includes financial analysis, application preparation, lender assessment, and legal documentation. Deals involving multiple funding sources or complex structures may take longer. Getting pre approval early in the process reduces the risk of delays when you are ready to settle.

What finance structures are used for business acquisitions?+

The most common structure is a term loan secured against business assets and goodwill, repaid on a principal and interest basis over three to seven years. Some deals use a split structure with senior debt from one lender and a second tier facility from another. Interest only periods of 12 to 24 months are available from some lenders to help with transition cash flow. Chattel mortgage arrangements are used when significant plant and equipment is part of the purchase.

What documents do I need to apply for business acquisition finance?+

You will need the target business's financial statements (typically two to three years), BAS statements, a breakdown of the purchase price, the contract of sale or heads of agreement, and your personal financial position including assets, liabilities, and income. If you are an existing business owner, your own business financials will also be required.

Can I finance a franchise purchase?+

Yes. Franchise purchases are a common application for business acquisition finance. Lenders assess franchise deals based on the brand's strength, the network's financial performance, and your individual circumstances. Some franchise agreements include restrictions on security arrangements that need to be factored into the finance structure, so it is important that the broker understands the franchisor's requirements before submitting.

Can I buy out a business partner with acquisition finance?+

Yes. Partner buyouts are one of the most common uses of business acquisition finance. The funding is structured to pay out the exiting partner's share, with the loan secured against the business assets and the ongoing cash flow. Buyouts are often simpler than full acquisitions because the business is already running and the remaining partner already understands the operations, clients, and financials.

What happens if the business I am buying has ATO debt?+

Outstanding ATO obligations on the target business need to be resolved before or as part of settlement. Lenders will not fund a business with unresolved tax debts because it creates a priority claim over other creditors. If ATO arrears are discovered during due diligence, they either need to be cleared by the vendor before settlement or factored into the purchase price and deal structure.

Is business acquisition finance available for first time buyers?+

Yes, though approval criteria are stricter. Lenders want to see that the risk is manageable even without prior ownership experience. A strong target business with clean financials, a vendor who supports the transition, and a buyer with relevant skills or experience in a related field all help. Vendor finance is particularly useful in first time buyer deals because it signals the seller's confidence and reduces the lender's exposure.

What is the difference between buying a business and buying business assets?+

Buying a business means acquiring the entire operation, including goodwill, staff, contracts, and liabilities. Buying business assets means purchasing specific items like plant, equipment, stock, or intellectual property without taking on the full business. The finance structure is different for each. Asset purchases are typically simpler and can be funded through standard equipment finance, while full business purchases require acquisition specific lending with goodwill assessment.

How do lenders value a business for acquisition finance?+

Lenders typically assess the business using normalised earnings, looking at EBITDA over two to three years and adjusting for owner specific expenses and one off costs. They compare the purchase price to those earnings to determine whether the multiple is reasonable for the industry. Lenders also assess the quality of revenue (recurring versus one off), client concentration, industry risk, and the strength of the management team continuing after the sale.

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