Buying a business: capital that settles on time

How are business purchases usually funded?

Buying an established business is one of the bigger financial decisions an owner makes, and few buyers pay for it entirely in cash. The usual mix:

Funding source	Role in the purchase
Buyer’s own cash	Shows commitment; often expected
First mortgage or second mortgage business loan	Main funding, secured on residential or commercial property
Vendor finance	Part of the price paid later to the seller
Equipment finance	Refinancing or adding to plant and vehicles
Working capital facility	Covers the first months after settlement

Property-secured lending does most of the heavy lifting because goodwill — the intangible value of a business — is hard for lenders to secure against.

Why speed matters in business purchases

Business sale contracts come with settlement dates, and sellers rarely wait. If finance isn’t in place in time, the buyer can lose the deposit, the deal or both. Bank approvals for business acquisitions often take weeks and come with extensive conditions.

With property security, private lenders can move much faster: $20k to $250k is possible the same day, and up to $5m is possible within 24–48 hours. Some buyers use a private loan to settle on time, then refinance to a bank once they’ve owned the business for a year and can show results in their own name. Our page on how settlement works covers the mechanics.

What lenders look at

Even with property, lenders want to understand the business being bought:

• Financials and BAS for the last two to three years
• The sale contract, including what’s included — stock, equipment, leases, goodwill
• Lease terms for the premises, especially remaining term and options
• Your experience in the industry
• The transition plan — handover period, key staff, key customers
• Existing finance on equipment, checked on the PPSR

A buyer with relevant experience and a sensible plan is far more fundable than one buying into an unfamiliar industry.

Don’t forget post-settlement working capital

The first months after taking over are often the tightest. You may need to:

• buy stock if the sale price didn’t include enough
• pay staff and suppliers before the first full month of revenue
• cover handover costs, new branding, systems or repairs
• absorb a short dip as customers adjust to new ownership

Arrange a working capital loan or line of credit alongside the purchase finance, so you’re not scrambling for it in month two.

Partner buyouts

When one partner wants to exit, the remaining owner often needs to fund the buyout quickly and without disrupting the business. A property-secured loan is the usual route: the remaining owner borrows against their home or the business premises, pays the departing partner, and repays from ongoing profits. Speed helps here too — drawn-out exits are stressful for everyone, including staff and customers.

An illustrative example

A mechanic who has run a workshop for another owner for eight years agrees to buy it for $650,000, settling in three weeks. He has $120,000 saved and a home with substantial equity. The vendor agrees to receive $100,000 over two years. A private first mortgage over his home funds the remaining $430,000 plus $60,000 of working capital, settling on time. Eighteen months later, with financials in his own name, he refinances to a bank. (Illustrative only.)

Settlement date set? Start your enquiry now.

Buyer’s checklist

• Signed contract of sale and settlement date
• Business financials, BAS and lease documents
• Your ID, and details of the property offered as security
• Vendor finance terms in writing, if any
• A first-year budget including working capital

Due diligence that also helps your finance

The same checks that protect you as a buyer make your finance application stronger:

• Financial due diligence — have your accountant review the seller’s financials, BAS and bank statements, and check that reported profit matches cash in the bank.
• Legal review — the sale contract, the lease, key customer and supplier contracts, and any employee entitlements transferring with the business.
• Asset checks — a PPSR search on equipment and vehicles to confirm nothing is already financed or secured.
• Customer concentration — how much of revenue depends on one or two customers who might leave with the old owner.
• Licences and permits — whether they transfer, and how long that takes.

Lenders will ask about many of these. Having the answers in a due diligence pack makes approval quicker and more confident.

Stamp duty and other purchase costs

Depending on your state and what’s included in the sale — particularly if real property is part of the deal — duty may apply. Add legal fees, accountant’s fees, lease assignment costs and any licence transfer fees. These can be meaningful, and they need to be funded at or around settlement along with the price.

The first 100 days

Plan the cash flow for your first three months in detail: stock top-ups, payroll under Payday Super, supplier accounts that may need to be re-established in your name, and any changes you plan to make. A modest working capital facility arranged before settlement takes the pressure off while you learn the business.

Ready to make the purchase happen?

Buying a business is a big step, and the right finance gets you to settlement without losing sleep or the deal. Asking what’s possible doesn’t involve a credit check. We don’t hand your details to a queue of lenders — one specialist reviews the purchase with you and calls back. Please give accurate figures for the price, the settlement date and any property, so the options we discuss are real. See if your purchase qualifies.