Existing Trading Business
Finance the acquisition of an established operating business with demonstrated trading history and cash flow.
BUSINESS ACQUISITION FINANCE
Business Purchase Finance Structured Around the Deal.
Financing the purchase of an existing business is very different from financing a house or vehicle. Lenders may assess the business's historical performance, goodwill, tangible assets, purchase price, your industry experience, available contribution and the amount of working capital required after settlement.
BUSINESS PURCHASE SCENARIOS
Finance for Different Ways of Buying a Business
The funding structure can depend on what you're buying, how the purchase is structured and the assets supporting the transaction.
Franchise Purchase
Certain lenders may assess established franchise businesses differently depending on the brand, industry, location and purchaser experience.
Management Buyout
Existing managers or employees purchasing the business may have strong operational knowledge but still need the right finance and contribution structure.
Business Expansion
An established business may acquire another operation, competitor or complementary business as part of a broader growth strategy.
HOW BUSINESS PURCHASE FINANCE WORKS
Lenders Want to Understand the Business Behind the Price
A business purchase assessment can involve both the historical business performance and your ability to operate it successfully after settlement.
1
Understand the Purchase
We start with the agreed or proposed purchase price, business type, structure of the sale and what assets are included in the transaction.
2
Review Business Performance
Historical financial statements, tax returns, profitability, cash flow and trading trends may form an important part of the assessment.
3
Assess the Buyer
Lenders may consider your industry experience, management capability, financial position and contribution to the purchase.
4
Structure the Funding
Depending on the transaction, finance may involve business lending, property security, equipment finance, vendor finance or a combination of facilities.
5
Credit Assessment
The lender considers the business, borrower, security, purchase price and proposed debt before determining whether the transaction is acceptable.
6
Settlement & Working Capital
The business still needs sufficient cash after settlement to operate, pay suppliers, wages and other ongoing expenses.
GOODWILL & BUSINESS VALUE
Not Everything You're Buying Can Be Used as Security
A business purchase price may include plant and equipment, stock, intellectual property, customer relationships and goodwill.
Tangible assets may provide lenders with identifiable security, while goodwill is more dependent on the ongoing profitability and sustainability of the business.
This can influence how much a lender is prepared to finance and how much contribution the purchaser may need to provide.
Discuss the proposed purchase structure →WHAT ARE YOU ACTUALLY BUYING?
The purchase price can include several components.
01
Plant, equipment and stock
02
Brand, customer base and goodwill
03
Existing cash flow and future earning capacity
YOUR CONTRIBUTION
Business Purchases Often Require Meaningful Buyer Equity
The amount you need to contribute can depend on the business, security offered, lender, buyer experience and overall risk of the transaction.
Cash Contribution
Many transactions require the purchaser to contribute their own funds toward the acquisition rather than financing the entire purchase price.
Property Security
Where appropriate, property security may improve the available lending options, although this also puts that property at risk if the debt cannot be repaid.
Vendor Finance
In some business sales, the vendor may agree to leave part of the purchase price outstanding. Lenders will generally need to understand and approve that structure.
AFTER SETTLEMENT
The business still needs cash to operate.
01
Wages and operating expenses
02
Suppliers, stock and inventory
03
Cash-flow buffer and working capital
WORKING CAPITAL
Don't Spend Every Dollar on the Purchase Price
A common issue in business acquisitions is focusing entirely on funding the purchase without allowing enough liquidity for the business after settlement.
Depending on the business, you may need funds for stock, wages, rent, suppliers, tax obligations, marketing and other operating costs before the business generates enough cash to cover them.
The funding strategy should therefore consider both the acquisition and the post-settlement cash-flow position.
Learn about business working-capital finance →PREPARING THE APPLICATION
A Business Purchase Needs a Clear Story
Strong commercial applications usually explain both the historical business performance and why the proposed purchase is sustainable under the new ownership.
Business Financials
Historical revenue, profitability, cash flow, liabilities and financial trends may all be relevant.
Demonstrate the businessBuyer Experience
Industry experience, management capability and understanding of the business can influence the lender's assessment.
Demonstrate the purchaserFunding Structure
Purchase finance, equipment, working capital and security should be considered together rather than as unrelated facilities.
Demonstrate the transactionWHY TULIP FINANCE
Business Purchase Finance Is About More Than Borrowing Money.
A lender needs to be comfortable with the business, purchaser, purchase price, security and ongoing ability to service the proposed debt.
We help work through the proposed transaction, identify potential funding gaps and present the scenario to lenders whose appetite may suit the deal.
Learn more about Tulip Finance →BUSINESS PURCHASE FAQs
Questions Before You Buy a Business?
Business acquisition funding is highly dependent on the individual transaction, but these are some common questions.
How much can I borrow to purchase a business?
There is no single lending percentage that applies to every business. The amount available depends on factors such as business profitability, tangible assets, goodwill, security, buyer experience, contribution and lender appetite.
Do I need a deposit to buy a business?
Most business acquisitions require some form of buyer contribution or supporting security. The required amount varies according to the transaction and lender.
Will a lender finance goodwill?
Some lenders may finance transactions that include goodwill, particularly where the business has strong sustainable cash flow and the overall risk is acceptable. The structure is assessed on a case-by-case basis.
Do I need experience in the industry?
Relevant experience can be important, particularly where the business relies heavily on the owner's expertise. Lenders may consider your management background and experience when assessing the transaction.
What financial information will I need?
Requirements vary, but business purchase applications commonly involve historical financial statements, tax returns, business sale information, purchaser financial details and evidence of the proposed contribution.
Can working capital be included in the finance?
Depending on the lender and transaction, working-capital facilities may potentially form part of the broader funding structure. This should be considered before settlement rather than after available cash has been exhausted.
FOUND A BUSINESS YOU WANT TO BUY?
Let's Review the Numbers Before You Sign the Deal.
Tell us about the business, purchase price, financial performance, your experience and available contribution and we can help you understand the possible funding options.
Information on this page is general in nature and does not take into
account your individual objectives, financial situation or needs.
Business finance policies, security requirements, loan terms, fees,
interest rates and credit criteria vary between lenders and transactions.
Prospective business purchasers should conduct appropriate legal,
financial, accounting and commercial due diligence before entering
into a transaction. Please refer to our Disclaimer and Credit Guide
for further information.