How to get a loan to buy a business in Australia

Banks lend against business acquisitions every week. But buyers who walk in with a contract of sale and a pile of the vendor's paperwork usually walk out with a decline, while buyers who present the same deal properly get approved. The difference is rarely the deal. It is the case built around it.

This guide covers what Australian lenders actually assess when you apply for a loan to buy a business, what they want to see before they say yes, and where applications fall over.

What the lender is really deciding

Strip away the paperwork and a business acquisition loan comes down to one question: will the business you are buying generate enough cash to repay the debt, even when trading gets tighter? Everything the credit team asks for feeds that question.

Lenders answer it with a handful of tests. The names sound technical, but the ideas are simple.

The earnings number the bank will use is not the vendor's number

Vendors sell on adjusted earnings: accounting profit plus a schedule of add-backs. Lenders do not accept that schedule on faith. A credit assessor rebuilds the earnings from the financial statements, strips out add-backs that are not evidenced, inserts a market wage for the owner's role, and tests what is left. If the vendor's $500,000 becomes the bank's $350,000, the loan you need may no longer service, and you find out weeks into the application.

The fix is to run that maths before you apply, not after. Evidence every adjustment, put the replacement wage in yourself, and present the number a credit team will actually recognise. An application built on a defensible earnings figure moves faster and gets fewer questions.

What lenders want to see

• Three years of financial statements for the business you are buying, plus year-to-date management accounts
• The contract of sale or heads of agreement, with the price and what is included
• A serviceability case: earnings, repayments, and the covenant tests above, ideally already run at a sensitised rate
• A 12-month cashflow forecast showing the business paying its bills and the debt through the transition
• Your own position: assets, liabilities, credit history and any property security available
• Evidence you can run the business: industry experience, management staying on, or a credible plan
• A deposit. Lenders typically fund 50% to 80% of the purchase price, and sit at the lower end where the price is mostly goodwill rather than assets, so expect to contribute 20% to 50% yourself

Property security changes everything

The single biggest lever in Australian business lending is whether you can offer property security. With real property behind the loan, more lenders will look at the deal, rates drop, and loan sizes stretch. Without it, the loan is assessed on the strength of the business's cash flow alone, fewer lenders play, and the earnings case has to be watertight.

Neither path is closed. Unsecured and goodwill lending exists and gets approved regularly. It just gets approved for applications where the serviceability case leaves no questions open, which is exactly the kind of case worth paying to have built properly.

Why good applications get declined

• The earnings case relied on unevidenced add-backs, so the assessor rebuilt it lower and the deal stopped servicing
• Debt service was never tested at a sensitised rate, and the deal failed the stress test inside the bank
• The application was a pile of documents rather than a case: no sources and uses, no covenant maths, no story
• Working capital was ignored, so the numbers showed the business running out of cash in month two
• The buyer's own position was presented badly, or one-off personal items were never explained

Credit teams reject on presentation, not merit. A decline does not mean the deal is dead. It usually means the case was not built the way an assessor reads one. We see submissions every month that failed at one lender and passed at the next once the earnings case was rebuilt and evidenced.

The process, start to finish

A well-prepared acquisition loan typically runs four to eight weeks from application to unconditional approval, depending on the lender and the deal. Preparation before the application is where time is won: a complete, credit-ready submission answers the assessor's questions before they are asked, and avoids the round trips that stretch approvals out to months.

Our part is the case itself: the serviceability model, the funding request and the 12-month lender cashflow forecast, built the way a credit team reads them, at fixed published fees. The application and lender negotiation is finance broking, which is handled by our broking partner The Lending Lab Pty Ltd, a separate business, with any referral relationship disclosed in writing. Fee discounts may apply when The Lending Lab handles the finance for the same matter.