How to Finance a Business Acquisition in Australia
Quick answer
- A business acquisition is usually funded by combining your own contribution with borrowed funds, most often a secured commercial term loan supported by property or business assets.
- Vendor finance, where the seller is paid part of the price over time, is commonly used to bridge the gap between what you can borrow and the agreed price.
- Whether you buy the shares or the assets changes what security a lender can take, so settle that early.
- Lenders assess the business you are buying as closely as they assess you, particularly whether its earnings will survive the change of owner.
- Duty on business assets has been abolished in some states, so confirm what actually applies rather than assuming stamp duty is payable.
The gap between the agreed price and the funds available
Financing a business acquisition in Australia normally means combining an owner contribution with a secured commercial term loan, and often some form of vendor finance, since few lenders will fund the full purchase price on the strength of the target business alone. The structure matters because you are borrowing against earnings that have not yet proven they will continue under new ownership.
If the funding package covers the purchase price but nothing beyond it, a sound purchase can still run into trouble during the handover. The way to avoid that is to work out the full funding requirement first, then match each part to the right facility.
Does it matter whether you buy the shares or the assets?
Yes, and it changes both your risk and what a lender can secure against. In a share sale you buy the company itself, so you inherit its history, including liabilities you may not have found. In an asset sale you buy selected assets such as equipment, stock, and goodwill, leaving the seller’s company behind.
Lenders generally find asset sales more straightforward, because specific assets can be identified and taken as security, whereas the security position in a share sale is less direct.
When a share sale suits: licences, contracts, or registrations are hard to transfer and are worth keeping intact. When an asset sale suits: you want a clean line between the seller’s past trading and yours.
What are the main ways to fund the purchase?
Most acquisitions use a combination of the following rather than a single facility.
| Source | What it does | Trade off |
| Owner contribution | Your own funds toward the price | Strengthens the application but ties up cash |
| Secured commercial term loan | Funds the bulk of the price over a set term | Usually needs property or substantial business assets |
| Vendor finance | The seller is paid part of the price over time | Bridges a gap, but terms are privately negotiated |
| Asset finance | Funds plant, vehicles, or equipment included in the sale | Covers the assets only, not goodwill |
| Short-term working capital | Covers the transition after settlement | Faster to arrange, but shorter term and higher cost |
Our Velonda Commercial product is built for the term loan part of this, funding acquisitions on a secured basis. Where the purchase includes vehicles or plant, that portion can often be structured separately as equipment and vehicle finance.
What security and contribution will a lender expect?
Lenders usually expect meaningful security and a genuine contribution from the buyer, because goodwill on its own is difficult to realise if the business does not perform. Property security is the most common basis for an acquisition term loan, whether that is commercial premises included in the sale or a property you already hold.
Where property is not available, a lender may take a general security agreement, which is a registered interest over the assets of a business, together with a personal guarantee. A personal guarantee is a promise by a director to cover the debt personally if the business cannot.
There is no fixed contribution percentage, since it depends on the security available, the quality of the earnings, and your experience in the sector. Discuss it early, because it determines the price range you can realistically pursue.
What does a lender assess in the business being bought?
A lender assesses whether the earnings you are buying are likely to continue after settlement. Consistent, verifiable profit over several years carries more weight than a single strong recent year.
Customer concentration matters, since a business drawing a large share of revenue from one or two clients carries more risk. Lenders also look at how dependent the business is on the current owner, because revenue tied to the seller’s personal relationships may not transfer. Your own industry experience forms part of the assessment, and add-backs, meaning expenses the seller argues are not ongoing, are examined closely rather than accepted at face value.
What costs beyond the purchase price should you fund?
Acquisition finance needs to cover the total cost of taking over the business, not just the headline price. Budget for legal and accounting due diligence, any duty payable, and working capital from settlement day, since wages, stock, and supplier terms continue while your cash is tied up in the purchase.
Duty is not the automatic cost many buyers expect. In New South Wales, transfer duty on business assets including goodwill, intellectual property, and statutory licences was abolished on 1 July 2016, and duty applies only where the transaction includes land or an interest in land, such as a transfer of lease (revenue.nsw.gov.au, transfer duty on business purchases, checked 25 August 2026). Landholder duty is separate and can apply when you acquire a significant interest in a company or trust holding land above a set threshold. Rules differ by state, so confirm with the relevant revenue office.
GST affects timing. The sale of a business as a going concern can be GST-free, but only where every condition is met: the sale is for consideration, the purchaser is registered or required to be registered for GST, both parties agree in writing that it is the sale of a going concern, and the seller supplies all the things necessary for the continued operation of the business and carries on that business until the day of sale (ato.gov.au, section 38-325 and GSTR 2002/5, checked 25 August 2026). The last condition is the one most often disputed, so have your adviser confirm it rather than assuming it applies. If the conditions are not met, GST is payable at settlement and must be funded even though it may later be claimed back.
Decision summary
Work out the full funding requirement before you approach a lender, then match each component to the right facility rather than stretching one loan across all of it. Resolve the share sale or asset sale question early, since it drives both your risk and the security available. Expect the business to be assessed on the durability of its earnings, not just its stated profit. Involve your accountant and a commercial lawyer before signing, since structure and tax treatment are hard to unwind afterwards.
About Velonda Capital
We are Velonda Capital, an Australian-owned business finance company based in Melbourne. We lend for business purposes only and are not a bank, and acquisition funding is assessed individually rather than against a fixed formula. If you are working through a purchase, contact our team for an indicative discussion before you commit to a price, or read more about internal secured commercial term loans.
Frequently asked questions
Can I buy a business without owning property?
Yes, though a lender then leans more heavily on the business assets and a director guarantee, which usually narrows the amount available.
Do I need a formal business valuation?
Not always, but an independent valuation helps where the price relies heavily on goodwill or on the seller’s own earnings figures.
Does the existing premises lease affect the purchase?
Yes, since the landlord usually has to consent to the transfer, and an unresolved lease can delay settlement or change what you are actually buying.
Can I finance buying into a business rather than buying it outright?
Partial buy-ins can be funded, though the assessment focuses on the shareholding structure and what security is available.