Business acquisition loans for buying the business you want

What is a business acquisition loan?

A business acquisition loan is finance used to buy an existing business or a stake in one. That might be a café, a trade practice, a transport run, a franchise outlet or a partner’s half of a company you already co-own. The loan may be secured against the business assets, property you own or both.

It is a different exercise from borrowing to run a business. Here the lender is assessing two things at once: whether the business being bought can earn enough to support the debt, and whether the buyer can run it. Business.gov.au points out that government generally does not fund business purchases, which puts the weight on private funding sources.

Who do business acquisition loans suit?

• Buyers moving from employment into ownership of an established business.
• Existing owners buying a competitor, a second location or a supplier.
• Partners buying out a co-owner.
• Franchisees purchasing an outlet or a resale.
• Managers buying the business they already run.

It tends to work best when the business has verifiable earnings, the buyer has relevant experience and the purchase price is supported by the trading history. For franchise-specific advice, see franchise finance. If the business is brand new, our start-up business loans page applies instead.

What do lenders look at?

Area	What they check
The target’s financials	Several years of profit, trends and the quality of the numbers
The price	Whether it is supported by earnings, assets and goodwill
Buyer experience	Industry background and management ability
Contribution	The deposit or equity the buyer brings
Security	Property, business assets, guarantees or vendor support
Handover plan	How the business continues once the seller steps away
Lease and contracts	Tenure of premises and key customer arrangements

Lenders also look at what is already pledged. If the business has assets with registered security, the Personal Property Securities Register, which records security interests in assets such as vehicles and equipment, will show it. Your solicitor and accountant usually check this during due diligence.

How can the purchase be funded?

Few acquisitions are funded by one source. Common building blocks include:

• Buyer’s contribution: Savings or the proceeds of another sale.
• Lender finance: A business loan secured by the business assets, other property or both.
• Property equity: A loan secured against a home or investment property, sometimes via a second mortgage.
• Vendor finance: The seller agrees to be paid part of the price over time.
• Earn-outs or staged payments: Part of the price depends on the business’s performance after settlement.

Each piece changes the risk picture. Our guide on how to fund a business purchase walks through these in more depth.

How does Ownright help with acquisitions?

Acquisitions rarely fit a template, and that is where our approach counts. Trevor Scott has more than 40 years in finance and has helped structure deals where timing, security and the seller’s expectations all pull in different directions. We look at the funding mix as a whole, not just the loan.

That means talking to you early, before contracts are signed if possible, so the structure fits the purchase rather than the other way around. We can look at property-backed solutions, short-term funding to secure the deal ahead of a longer refinance and options when the bank has said no. Ownright works across every state and territory. We work alongside your accountant and solicitor, who remain essential for due diligence and contracts.

An illustrative situation

Imagine a manager, purely illustrative, who has run a regional bakery for years and is offered the chance to buy it from a retiring owner. The owner has a small home with some equity but not enough cash for the whole price. The bank is wary of lending against goodwill and wants more than the manager can offer.

A blended structure might use a deposit from savings, a loan secured against the bakery’s equipment and the manager’s property and a portion of the price paid to the seller over time. The lender would test the bakery’s recent profits, the lease and the manager’s day-to-day knowledge of the business. The right mix depends on the lender and the seller’s flexibility.

Looking at buying a business? Apply here

Apply with Ownright before you sign a contract if you can. Tell us about the business, the price and what you can contribute, and we will outline the funding options.

Mistakes to avoid when buying a business

• Signing before finance is checked. A contract without a finance condition leaves you exposed.
• Overpaying for goodwill. The price should be supported by verifiable earnings.
• Ignoring the lease. A short or uncertain lease reduces the value and the lender’s appetite.
• Underestimating working capital. The business may need cash right after settlement.
• Relying on one customer. Concentration risk worries lenders and buyers alike.
• Skipping due diligence. Your accountant and solicitor are not optional extras.
• Leaving the handover vague. Lenders want to know the business keeps running smoothly.

What documents do I need?

• Photo ID and a summary of your own assets and liabilities.
• The business’s financial statements, tax returns and BAS for recent years.
• Bank statements for the business.
• The contract of sale or a draft, plus a list of included assets.
• The lease, key contracts and a customer summary.
• Your résumé or evidence of relevant experience.
• Details of any property you intend to offer as security.

The business loan documents checklist lists the standard items.

When a bank is hesitant

Banks can be cautious about lending against goodwill, especially for newer owners or in sectors they view as risky. Other lenders may weigh security or the target’s earnings differently. We look at which assets and structures give the deal the best footing. If Ownright can’t find the solution, no one can.

How should I prepare before making an offer?

Preparation before you make an offer saves money and heartache. A sensible sequence looks like this:

• Talk to your accountant first. Understand what a fair price looks like given the earnings, and ask for a review of the target’s numbers.
• Check the funding picture early. Know roughly how much you can borrow, what security you can offer and how much you need to contribute, before you commit.
• Make the offer conditional. A finance condition, plus due diligence and lease conditions, gives you a way out if things do not stack up.
• Review the lease. Tenure, options and rent review terms all affect the business’s value and what a lender will accept.
• Plan the transition. Agree how the seller will hand over customers, suppliers and know-how, ideally with a defined period of support.
• Budget for working capital. The first months after settlement often need extra cash, for stock, wages and the unexpected.

It also helps to think about the structure of the buyer. Will you buy personally, through a company or through a trust? That choice affects tax, liability and how a lender assesses you, and is a conversation for your accountant and solicitor.

Finally, remember that the loan is one part of a larger plan. A strong acquisition has realistic earnings, a fair price, a funding mix that leaves some breathing room, and a plan for the first year. We help with the funding mix and the lender conversations; your professional advisers handle the legal and tax detail.

Next step

Tell us about the business you want to buy, the price and your own position. We will outline a funding approach. Apply now or contact our Knoxfield head office.