Buying a Business: What Lenders Will Finance and What They Won't

Someone is selling a business you want. Maybe you already run a similar operation and this would be your second site. Maybe you are on a salary and ready to back yourself. Maybe you have been managing the place for years and the owner is finally willing to sell. Each of those buyers walks into a very different finance conversation, and the gap between what you expect a lender to cover and what they actually will is where most deals stall.

Why buying a business is financed differently

The ABS counted 2.73 million actively trading businesses at 30 June 2025, with 437,150 entries and 370,500 exits during 2024-25. Businesses change hands constantly, and most buyers assume a lender sees established revenue as lower risk. Up to a point, they do. The complication is that lenders secure against things they can sell if the loan goes bad, and a large share of most purchase prices is not a thing anyone can sell.

What lenders will and won't finance

The split between tangible assets and goodwill

Every purchase price breaks into two parts. Tangible assets are the plant, equipment, vehicles, fit-out and stock: items with a resale value a lender can estimate. Goodwill is everything above that: the customer list, the reputation, the trading name, the reason the business earns more than the sum of its gear.

Goodwill is often the larger half, and most lenders are cautious about it. If the business stops trading, the equipment can be auctioned. The goodwill cannot. So most lenders size the secured loan against the asset value and expect the goodwill to be covered another way: your own contribution, property security, or an arrangement with the seller.

There are exceptions. Some lenders will finance goodwill for established franchise resales where the brand and franchisor support reduce the risk. Professional practices such as accounting, dental and medical also attract goodwill lending from specialist lenders, because those client books tend to be stable and transferable. Outside those categories, expect the goodwill to land on your side of the ledger.

Your situation matters as much as the business

Lenders do not just assess the business you are buying. They assess who is buying it and how you plan to run it.

If you are on a salary (PAYG) buying a business to run yourself, a lender will use your personal income to assess serviceability while you transition in. The target business still needs to show it can sustain the repayments once you are full-time, but your salary bridges the gap that a first-time buyer with no trading history would otherwise have.

If you already run a business and are buying another, you bring an ABN with trading history, BAS lodgements, existing cash flow, and potentially equipment or property as additional security. A lender can assess the combined cash flow of both operations, opening structures a first-time buyer cannot access.

If you are buying the business but installing a manager, the lender is betting on it running without either the current owner or you on the floor. Expect more questions about the staff, the systems, and how dependent the revenue is on any one person.

Whether the earnings survive the handover

Across all these scenarios, the lender is weighing how transferable the earnings are once the current owner walks out. If customers deal with the owner personally, that is a risk on the file. Long-dated contracts, a booked forward pipeline and staff who are staying push the other way.

The numbers, over several years

business.gov.au sets the baseline: examine the past three to five years of tax returns, business activity statements, accounts receivable and payable, balance sheets, profit and loss records, cash flow statements and sales records. Your lender will want the same period. One strong year sitting on the end of three flat ones invites questions.

The structures that get these deals done

Most business purchases are not one loan. They are a combination of structures, each covering a different part of the price.

A secured business loan

The standard starting point, secured against the tangible assets and often against property as well. The RBA's lenders' interest rates for June 2026 put the average rate on new small business loans at 7.05% per annum and on outstanding loans at 7.45% per annum, across variable and fixed. Your own rate depends on the security, the term and the strength of the file.

An unsecured business loan

Where the goodwill gap is too large to cover from savings but you do not want to put up property, an unsecured business loan can fill part of it. No specific asset is pledged, but expect a personal guarantee, lower amounts, shorter terms and higher rates. For a buyer with strong personal income or an existing business with solid cash flow, it can be the piece that closes the deal.

Property as security

Offering equity in a home or commercial premises as security usually widens what a lender will consider and improves the rate. It also puts personal property behind a commercial decision, which is worth thinking through slowly.

Vendor finance

Sellers sometimes agree to leave part of the price in the business, paid out over an agreed period from the earnings. It closes the goodwill gap and keeps the seller invested in a clean handover. This is a negotiated contract term, not a product you apply for, so it belongs in the price conversation early.

Refinancing assets you already own

If your existing business owns equipment or vehicles outright, refinancing them releases capital you can put toward the purchase. Equipment finance and a line of credit frequently sit alongside the main purchase loan rather than competing with it.

The GST detail worth raising before you sign

If the sale qualifies as a going concern, no GST is payable. The ATO conditions: the sale is for payment, the purchaser is registered or required to be registered for GST, both parties have agreed in writing that the sale is of a going concern, and the sale includes everything necessary for continued operation, with the seller carrying it on until the day of sale.

On a $600,000 purchase price, that written agreement is the difference between financing $600,000 and financing $660,000 while you wait to claim the GST back. Your accountant and solicitor should confirm the sale qualifies before you rely on it, and the wording needs to be in the contract, not in an email.

What to do next

Get the financials before you get emotionally committed. Three to five years of tax returns, BAS and profit and loss statements tell you whether the asking price is defensible. Check the Personal Property Securities Register for debts registered against the plant and equipment you think you are buying. An asset with finance owing on it is not security you can offer.

Then split the price on paper before you approach anyone for finance. A $600,000 business that is $200,000 of equipment and $400,000 of goodwill is a completely different conversation. Raise vendor finance with the seller in the same discussion as price, and confirm whether the lease transfers or has to be renegotiated.

If you are weighing up a business purchase, Emu Money's finance specialists can compare structures across 50+ lenders and work out what the deal will support before you commit to a price. Whether you are buying from a salary, expanding an existing operation, or picking up a franchise, the structure matters as much as the number. Explore business loan options.

Subject to lender approval, terms, and conditions apply.