Buying an existing business is a different financing problem from buying an asset. When you finance a ute or an excavator, there is one thing to value and the lender can see it. When you buy a business, you are buying a mix of things — equipment, vehicles, stock, a customer base, a name, a lease, sometimes a franchise agreement — and only some of that mix can be used as security.
That difference is the reason acquisition finance is assessed the way it is, and the reason two buyers looking at similar businesses can be offered very different structures.
This page explains the categories a lender may look at and how the purchase price is usually broken up. It does not set out thresholds, because there are not universal ones — every lender, and every product within a lender, assesses these differently, and the same buyer can get different answers from different funders on the same deal. It sits under our business loans and finance hub.
What a loan to buy a business usually means in practice
There is rarely a single loan that funds an entire business purchase. More often the purchase is split, and each part is funded by whatever suits it:
- The hard assets — vehicles, plant, machinery, fit-out — can often be funded against the assets themselves, using the same structures used for any equipment purchase.
- The intangible part — goodwill, the customer list, the trading name, the benefit of contracts — has no resale value to a lender if things go wrong, so it is generally treated as unsecured or as needing other security.
- Stock and working capital — the money the business needs to keep trading from day one — is a separate need again, and is often the part first-time buyers underestimate.
Understanding that split matters, because it tells you where the finance conversation will be easy and where it will be hard. The asset half of a purchase is familiar territory for asset lenders. The goodwill half is where structure, security and the strength of the buyer do the work.
What lenders may assess
These are categories, not tests you either pass or fail. How much weight each one carries — and whether it is looked at at all — varies between lenders and between products. Our guide to business loan requirements covers the general picture.
Your position as the buyer
Your own financial position, credit history, and what you are contributing to the purchase. Also relevant: what you bring to the business other than money. A buyer purchasing a trade business in the trade they already work in presents differently from a buyer with no background in it.
The financial history of the business
Lenders generally want to understand what the business has actually been earning, not what it is projected to earn. That usually means historical financial statements and tax returns, and an explanation of anything unusual in them. The quality and completeness of these records affects the conversation as much as the numbers in them do.
How the purchase price is made up
The split between hard assets and goodwill is one of the most important pieces of information in an acquisition. A price weighted toward equipment and vehicles is a different funding proposition from the same price weighted toward goodwill.
What security is available
Security might come from the assets being purchased, from assets you already own, from property, or from a combination. Some structures need security outside the business entirely. This is one of the biggest points of difference between lenders.
The industry and how the business trades
Some industries are better understood by lenders than others. Things like customer concentration, whether contracts transfer with the sale, seasonality, and how dependent the business is on the current owner all form part of the picture.
How the deal is structured
Whether you are buying the business assets or the entity that owns them, how the lease is being handled, whether there is a handover or training period, and whether any part of the price is deferred or tied to future performance. These affect both risk and what can be secured.
The entity and the people behind it
Whether the buyer is a sole trader, company or trust, who the directors are, and what guarantees are being offered.
Where buying a franchise is different
A franchise purchase runs on the same principles but adds a layer, because you are not only buying a business — you are entering an agreement with a franchisor.
- The franchise agreement itself is part of the deal. Its term, renewal rights, transfer conditions and territory can all matter to a lender, because they affect whether the thing being bought still exists in five years.
- Franchisor approval is usually required for the transfer, and sometimes for the buyer. That is a condition sitting outside the finance.
- Established franchise systems can be better understood by lenders than a one-off business, simply because there is more comparable information available. That is a general observation about information availability, not a guarantee of a better outcome.
- The fee structure is ongoing — franchise fees, marketing levies and required refits are costs that continue after settlement and belong in your servicing picture, not just your purchase price.
Whether you are buying a franchised outlet or an independent business, the same core question applies: what part of this price is backed by something a lender can value, and what part is not?
How the pieces of a business purchase are usually funded
| Part of the purchase | What it is | How it is commonly approached |
|---|---|---|
| Vehicles, plant and equipment | Trucks, utes, machinery, tools | Funded against the asset — a chattel mortgage or commercial hire purchase are the usual structures |
| Fit-out and fixtures | Shop or workshop fit-out, signage | May be fundable as equipment, depending on what it is and whether it can be removed |
| Goodwill and intangibles | Customer base, trading name, contracts | Generally not secured by the thing itself — often approached as an unsecured business loan or supported by other security |
| Stock | Inventory transferring at settlement | Usually a working-capital question rather than an asset one |
| Working capital | Wages, rent and running costs from day one | A separate need — often what buyers underestimate |
The reason to think about a purchase this way is practical: a deal that looks hard to finance as one number can look very different once it is broken into parts and each part is matched to the structure that suits it. Where existing assets are being used to raise funds, sale and leaseback is another route worth understanding.
Talk to Tradie Finance about an acquisition
What to have ready before you speak to a broker
Acquisition deals move on the quality of information. Having these in order will not change the criteria of a lender, but it will change how quickly you get a real answer:
- The contract of sale or heads of agreement, including how the price is allocated between assets, stock and goodwill
- Financial statements and tax returns for the business you are buying, covering several years where available
- An asset list — what plant, vehicles and equipment transfers, and its condition
- The lease — remaining term, options, and whether it transfers
- For a franchise: the franchise agreement and the disclosure document
- Your own financials — your position, your existing commitments, and what you are putting in
- A clear statement of what you will need for working capital after settlement, not just to complete the purchase
If you have not yet had the financials of the business reviewed by your accountant, that is worth doing before the finance conversation rather than during it. Our business loan calculator is a useful way to sanity-check repayment shapes once you know the numbers, and business loan interest rates explains what drives the cost.
A practical caution on the numbers
Two things are worth saying plainly.
First, the purchase price is not the amount you need. Stamp duty, legal and accounting fees, the working capital to run the business, and any immediate equipment replacement all sit on top. Buyers who fund exactly the purchase price frequently find themselves short in the first quarter.
Second, projections are not history. A forecast from a vendor of what the business will do under new ownership is a sales document. Lenders generally assess what has happened, and so should you.
Frequently asked questions
Can you borrow the whole purchase price of a business?
There is no universal answer — it depends on the lender, the structure, what the price is made up of, what security is available and your own position. A purchase weighted toward vehicles and equipment is a different proposition from one weighted toward goodwill. The realistic first step is to establish how the price is allocated, because that shapes everything that follows.
Is goodwill harder to finance than equipment?
Generally, yes — and the reason is straightforward. Equipment can be valued and, if necessary, sold. Goodwill cannot be repossessed. That does not mean goodwill cannot be funded; it means it is usually funded on a different basis, often against other security or on unsecured terms.
Do I need to be in the same industry as the business I am buying?
Not necessarily, and lenders vary in how much weight they place on it. Relevant experience is one of the things that can be considered as part of the overall picture — particularly in trade and specialist businesses where the skills of the owner are part of what the business is.
How is buying a franchise different from buying an independent business?
The core assessment is similar, but a franchise adds the franchise agreement, franchisor approval of the transfer, and ongoing franchise fees. Established systems can be better understood by lenders because more comparable information exists — though that is about information, not a guaranteed outcome.
Should I buy the business assets or the company?
That is a legal and tax question rather than a finance one, and it should be answered by your accountant and solicitor before you settle on a structure. It does affect finance, because what is being bought determines what can be secured — which is why the finance conversation works best after that decision, or at least alongside it.
Talk to Tradie Finance about an acquisition
Buying as a sole trader? Our sole trader loans guide covers how lenders assess a sole trader across business finance.
Written and reviewed by the Finance Director at Tradie Finance
This article is general information only and does not constitute credit or financial advice. It does not take into account your objectives, financial situation or needs. Tradie Finance operates under Australian Credit Licence 506065 (Five Tees Pty Ltd). Lending is subject to approval, lending criteria, terms, conditions and fees. Business acquisition structures have legal and tax consequences — obtain independent legal and accounting advice before entering into a contract of sale.