How to Finance a Business Acquisition in Australia
Almost no business purchase is funded by one loan. It is a stack of four or five facilities that interact, and the order in which you assemble them decides how much of your own money the deal takes and whether your house ends up as security.
The short answer
A business acquisition in Australia is usually funded by a stack rather than a single loan: your own equity, a term facility assessed against the target’s normalised earnings, security over property where it is available, vendor finance or an earn-out for part of the price, equipment finance carved out separately, and a working capital facility for the period after completion. Each layer changes the size of the ones around it. The practical work is deciding which layers you use and in what order, because that determines how much cash the deal consumes and what security you are asked to give.
Acquisition finance is a stack, not a loan
The most common misconception among first-time buyers is that acquisition finance behaves like a home loan. You find the business, the lender values it, they fund a percentage, you pay the rest. That is not how it works, and expecting it to is how buyers end up short at completion.
A home loan has one security, one valuation methodology and one repayment source. A business acquisition has none of those things reliably. Goodwill cannot be sold to recover a debt. Cash flow can walk out the door with the owner. The equipment may be leased rather than owned. So lenders assemble the funding from several sources with different security behind each, and the sum of those sources, not any single one, is what gets the deal done.
The practical consequence is that the question “how much will a lender lend me against this business” has no clean answer. The better question is which combination of facilities the deal can carry, and that is a structuring exercise before it is a lending one.
Buyers ask what percentage a lender will fund. The number depends almost entirely on what else is in the stack, which is a decision you make rather than one the lender hands you.
What each layer in the stack does
Not every deal uses every layer. Most use four or five.
| Layer | What it funds | Effect on the rest of the stack |
|---|---|---|
| Your own equity | The portion you contribute in cash. | The single largest lever. More equity means less debt to service, which lifts what the earnings can support and reduces the security asked for. |
| Term facility against the business | Goodwill and the going concern, assessed against normalised earnings. | Usually the core of the deal. Its size is set by serviceability from the target’s earnings, not by the purchase price. |
| Property security | Nothing on its own, but it changes the terms of the term facility. | Where real property is available as security, appetite widens materially and the funding proportion improves. |
| Vendor finance or earn-out | A deferred portion of the price, paid to the seller over time or on performance. | Reduces the day-one funding requirement. Often treated as debt, and frequently required to be subordinated. |
| Equipment finance | Vehicles, plant and equipment inside the target, funded separately. | Carving these out of the main facility can free up capacity, at the cost of additional commitments. |
| Working capital facility | The trading gap after completion: stock, wages, receivables. | Frequently forgotten. Its absence is the most common reason a well-funded acquisition still runs into trouble in month three. |
The layers interact in ways that are not obvious. Adding vendor finance can reduce the term facility required, which improves serviceability, which can in turn remove the need for property security. Carving out equipment finance frees capacity in the main facility but adds monthly commitments that the earnings then have to carry. There is no single right stack, only the one that suits the deal and your position.
How the earnings themselves get assessed, and what a lender does to the seller’s profit figure before funding against it, sits on our business acquisition finance page.
Vendor finance and earn-outs: how a lender reads them
This is the least understood part of a business purchase and the one most likely to be handled badly.
Vendor finance is where the seller leaves part of the price in the deal, repaid to them over an agreed period. An earn-out is where part of the price is contingent on the business performing after you take over. They are different instruments and lenders treat them differently, but both do something useful before a dollar changes hands.
They are a credit signal, not just a funding source
A seller willing to leave twenty per cent of the price in the business for two years is making a statement about whether the earnings are real. A seller who insists on the full amount in cash at completion is making a different one. Lenders read that, and a vendor-supported deal is often looked at more favourably than an identical deal without one, independently of the money involved.
The terms of the vendor arrangement affect your main facility
Vendor finance is generally treated as debt for serviceability, so the repayments count against you. A lender may require it to be subordinated to their facility, meaning the seller cannot be repaid ahead of the bank and cannot enforce while the primary debt is outstanding. Whether the seller will accept subordination is a negotiation you need to have before you agree the commercial terms, not after your lender raises it.
Earn-outs create a timing problem
An earn-out payable in eighteen months is a liability that has to be funded when it falls due. If the business performs, you owe it. If the business performs and you have used all your capacity on the acquisition facility, you owe it and cannot pay it. Planning for the earn-out payment at the point of structuring, rather than assuming future cash flow covers it, is the difference between a clean deal and a refinance under pressure.
The drafting of both is a legal matter and the tax treatment is your accountant’s. What we can tell you is how a given structure will be read by lenders before you commit to it in a contract.
Will you have to put up the family home?
This is the question buyers actually want answered and most guides talk around. The honest answer has three parts.
Sometimes, and it is a real trade-off rather than a formality. Where property security is offered, lender appetite widens and the funding proportion improves, because the lender has something recoverable behind a debt that is otherwise secured against goodwill. That is a genuine benefit, and for some deals it is what makes the numbers work. It is also your home.
Not always. Deals do get done without residential security, particularly where the buyer’s equity contribution is substantial, the target’s earnings are strong and verifiable, the customer base is not concentrated in one or two accounts, and the seller is supporting the transition. Whether that is available to you depends on the deal rather than on asking nicely.
Directors’ guarantees are a separate question, and they usually apply either way. A guarantee is a personal promise to pay if the company does not. It is not the same as a mortgage over your house, but it is not nothing, and it survives after the facility. Most commercial lenders will require guarantees from directors on an acquisition facility regardless of what other security is provided. A broker telling you a business loan is entirely without personal exposure is not being straight with you.
The useful work here is knowing, before you are emotionally committed to a business, which structures would avoid residential security and whether your deal can reach them. That is a conversation to have while you are still looking.
Looking at a business but not sure it will fund?
Bring us the information memorandum and the last three years of financials. Fifteen minutes tells you roughly what stack the deal could carry, whether residential security is likely to be needed, and where the numbers are going to be questioned. No obligation, no fee at any point.
When finance needs to exist relative to the contract
Most buyers approach a lender after signing something. That order costs them money and sometimes costs them the deal.
- Before you make an offer. Not for approval, which nobody can give you on a business you have not yet been given full information on, but for a realistic read on what stack the deal could carry and what your contribution would need to be. Making an offer you cannot fund wastes everyone’s time and damages your position with the seller and the broker.
- Before heads of agreement. Exclusivity periods run to a clock. Spending the first three weeks of a six week exclusivity working out whether the deal is fundable is three weeks you do not get back for due diligence.
- When the finance condition is drafted. A finance clause with an unrealistic timeframe is worse than no clause. Commercial acquisition finance takes longer than a home loan because the lender is assessing a business, not a property, and the information usually arrives in stages. Your solicitor drafts the clause. Knowing what timeframe is achievable before it is drafted is the useful contribution.
- Before the deposit goes at risk. Obvious, and still the most common expensive mistake we see.
The pattern worth avoiding is the one where due diligence, legal drafting and finance all run in parallel in the final fortnight. Something gets rushed, and it is usually the part where somebody should have asked what happens to the earnings when the owner leaves.
What changes if the premises are part of the deal
Where the seller owns the building and it is included, you are running two transactions that a lender will assess on different terms. The property component is assessed like commercial property lending, against the asset. The business component is assessed against earnings. They have different funding proportions, different terms and often different lenders.
Buyers frequently assume including the freehold makes the finance easier because there is now real security in the deal. It often does improve the terms, but it also increases the total amount being borrowed, and the earnings still have to service both. A deal that funds comfortably as a goodwill purchase with a lease can become marginal once the building is added.
Where the premises are leased instead, the lease term matters more than most buyers expect. A lender funding a five year facility against a business operating on a lease with two years left and no option is being asked to take a risk the buyer may not have noticed. Check the remaining term and options before you get attached to the numbers. Our commercial property loan page covers the property side.
The protections that do not apply to you here
This section exists because almost nobody tells business buyers this, and you should hear it from the broker rather than find it out later.
Best Interests Duty does not apply to business lending. Since 1 January 2021 mortgage brokers have owed a Best Interests Duty under the National Consumer Credit Protection Act, and the conflict priority rule requires the client’s interests to be put ahead of the broker’s. That regime covers consumer credit: home loans, personal loans, residential investment lending. An acquisition facility for a business is not consumer credit, so the duty is not engaged. The same broker who owes you that duty on your home loan does not owe it to you on the acquisition.
The unfair contract terms regime and the Banking Code may still assist. Small business protections operate under different legislation from the consumer credit regime, and coverage depends on the size of the facility and whether the lender subscribes to the relevant code. That is a legal question, and worth asking your solicitor about in respect of the specific facility you are being offered.
AFCA can consider small business credit disputes up to a limit. The Australian Financial Complaints Authority can consider disputes about small business credit facilities up to $6.3 million. Above that threshold, your recourse is the courts. Most single-site acquisitions sit comfortably under it. Larger or multi-facility transactions may not, and knowing which side of the line you are on before there is a dispute is worth the two minutes it takes to ask.
We raise this because a business buyer who assumes the consumer protections travel across is making a decision on a false premise. They do not. What you have instead is the quality of the people you engage and what they put in writing, which is why the questions worth asking are about disclosure, lender panel and fees rather than about duties.
On fees: we charge you nothing, on any loan type, including commercial and acquisition work where a broker fee is common across the market. No arrangement fee, no engagement fee, no success fee, and no clawback recovery fee. We are paid by the lender on settlement and it is disclosed to you in writing before any work begins.
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These reviews reflect other clients’ experiences. They are not a promise of any particular outcome for your transaction, which will always depend on the deal, your position and the lender’s assessment.
Frequently Asked
Business acquisition finance questions
What buyers ask before they commit to a transaction.
How much deposit do I need to buy a business in Australia?
There is no fixed figure, because it depends on what else is in the funding stack. Your contribution, vendor finance, available property security and the strength of the target’s earnings all move it. A deal with strong verifiable earnings, property security and vendor support needs materially less cash from you than a goodwill-only purchase with none of those.
What is vendor finance and will a lender allow it?
Vendor finance is where the seller leaves part of the purchase price in the deal, repaid over an agreed period. Lenders generally allow it and often view it positively, since a seller backing their own numbers is a credit signal. It is usually treated as debt for serviceability and a lender may require it to be subordinated to their facility, which is a term to negotiate with the seller early.
Will I have to use my house as security?
Not always, though offering property security widens lender appetite and improves the funding proportion. Deals do proceed without residential security where the buyer’s equity is substantial, earnings are strong and verifiable, and customer concentration is low. Directors’ guarantees are a separate matter and are usually required regardless of what other security is given.
What is an earn-out and how does it affect my finance?
An earn-out makes part of the price contingent on the business performing after completion. It reduces what you fund on day one, but it creates a payment that falls due later and has to be funded from somewhere. Planning for that payment at the point of structuring, rather than assuming future cash flow covers it, avoids refinancing under time pressure.
When should I talk to a broker about an acquisition?
Before you make an offer, and certainly before heads of agreement. Exclusivity periods run to a clock, and spending the first weeks working out whether the deal is fundable takes time away from due diligence. It also means the finance condition in your contract can be drafted to a timeframe that is actually achievable.
Does Best Interests Duty apply when I borrow to buy a business?
No. Best Interests Duty applies to consumer credit under the National Consumer Credit Protection Act, meaning home loans, personal loans and residential investment lending. Business and commercial lending sits outside that regime. It is worth knowing, because the protections you have on your home loan do not travel across to the acquisition facility.
Can AFCA help if something goes wrong with a business loan?
AFCA can consider disputes about small business credit facilities up to $6.3 million. Most single-site acquisitions fall under that threshold. Above it, recourse is through the courts. It is worth establishing which side of the line your facility sits on before there is a problem rather than after.
Do you charge a fee for commercial or acquisition work?
No. Intellect Finance charges clients nothing on any loan type, including commercial, corporate and acquisition finance, which is where a broker fee is common across the market. No arrangement fee, no engagement or success fee, and no clawback recovery fee. We are paid by the lender on settlement, disclosed to you in writing before any work begins.
The honest bottom line
Buyers spend months on the business and days on the funding, then discover the funding was the constraint all along. The purchase price is a negotiation, but what the deal can carry is close to arithmetic, and that arithmetic is knowable early. A conversation before you make an offer costs nothing and tells you what stack the deal supports, what your contribution would need to be, and whether residential security is likely to come into it.
The two things worth deciding before you sign anything: what you are prepared to put up as security, and whether the seller will support the transition with deferred consideration. Those two answers shape the entire structure. Everything else, the lender selection, the facility mix, the timing of the finance clause, follows from them.
Joseph Sukkar
Joe founded Intellect Finance in Penrith in 2005 and has more than 25 years in Australian finance. Commercial and corporate lending is a core part of the practice rather than a sideline, covering acquisitions, buy-ins and buy-outs, succession, commercial property and the working capital facilities that sit around a transaction. The brokerage is family-run and charges clients no fee on any loan type. More about the team.
Sources
Federal Register of Legislation, National Consumer Credit Protection Act 2009, Part 3-5A, for the scope of the best interests obligations and the conflict priority rule. legislation.gov.au
Australian Securities and Investments Commission, Regulatory Guide 273 Mortgage brokers: Best interests duty. asic.gov.au
Australian Financial Complaints Authority, Rules and monetary limits, including the small business credit facility threshold. afca.org.au
Australian Bureau of Statistics, Counts of Australian Businesses, including Entries and Exits, reference period July 2022 to June 2026, released 18 August 2026. abs.gov.au
Important disclosures, general advice warning and licensing
General information only. This article is general information only and does not constitute financial, credit, legal, tax or investment advice. It does not take your circumstances, the specific transaction, or the target business into account. Before acting on any information here, consider whether it is appropriate to your objectives and situation, and obtain your own advice.
Business lending is not consumer credit. Acquisition finance for a business purpose is not regulated consumer credit under the National Consumer Credit Protection Act 2009. Best Interests Duty does not apply to it. Where this article describes that duty, it does so to explain what does not apply, not to suggest that it does.
Legal and tax matters. Whether to structure a transaction as a share sale or an asset sale, the drafting of vendor finance, earn-out, subordination, guarantee and finance clause terms, the treatment of employee entitlements, and the tax consequences of any structure are matters for your solicitor and your accountant. Nothing in this article is legal or tax advice, and no structure described here should be adopted without that advice.
Due diligence remains yours. Nothing in this article is a recommendation to acquire any business or an assessment of any target. Commercial due diligence on the business, its earnings, its customers, its contracts and its liabilities is your responsibility and that of the advisers you engage for it.
Lender policy varies and changes. Funding proportions, security requirements, guarantee requirements, treatment of vendor finance and earn-outs, appetite for goodwill, and approval timeframes are set by individual lenders, differ substantially between them, and change without notice. Descriptions of common practice here are general observations, not a statement of any lender’s policy, and are not a quote, an offer or a prediction of your outcome. No broker can guarantee approval.
Dispute resolution limits. The AFCA monetary limit referred to applies to small business credit facility disputes and is subject to AFCA’s Rules, which are amended from time to time. Confirm the current limit and eligibility with AFCA directly in respect of your own facility.
What we charge you. Nothing, on any loan type. No arrangement fee for residential, commercial, corporate, asset, SMSF or personal lending, no fee for complex or specialist lending, and no clawback recovery fee if a facility is discharged early. Lenders pay us a commission on settlement, disclosed to you in writing before any work begins.
About the reviews shown. The reviews displayed on this page are genuine reviews published by clients on Intellect Finance’s Google Business Profile, shown live via a third-party reviews widget. They reflect those individuals’ own experiences and are not a promise of any particular outcome.
Intellect Finance Pty Ltd holds Australian Credit Licence 390611 and is a member of the MFAA and AFCA. Lending criteria, fees and terms apply. Article checked 2 September 2026.
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Send us the information memorandum and the last three years of financials, and we will tell you what stack the deal could carry, where a lender will question the numbers, and whether residential security is likely to be required. If the deal does not stack, we will tell you that too. Penrith based since 2005, Parramatta and Sydney CBD by appointment, clients Australia-wide. ACL 390611.
General information only, not financial, legal or tax advice. Business lending is not regulated consumer credit. Lender policy varies and changes without notice. No broker can guarantee approval.
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