Buying an existing business is one of the fastest ways to generate income, but funding the purchase requires specialist finance that most banks are reluctant to provide. Business purchase finance — also called business acquisition finance — lets you fund the full purchase price including goodwill, plant and equipment, stock and working capital, through commercial lenders who understand how businesses are valued and transacted.
What Is Business Purchase Finance?
Business purchase finance is a loan used to fund the acquisition of an existing business. Unlike a standard business loan, acquisition finance takes into account the income-generating potential of the target business, the value of its tangible assets, and the goodwill attached to its brand, customer base and contracts. Lenders assess both the buyer's financial position and the viability of the business being acquired.
How Much Can I Borrow?
Business acquisition loans are available from $50,000 up to $5 million through Overdrive Funding's lender panel. Most lenders will fund 50–70% of the purchase price, requiring the buyer to contribute 30–50% as equity or deposit. For asset-heavy businesses, a higher loan-to-value ratio may be available based on the value of the plant and equipment included in the sale.
What Can the Loan Cover?
A business purchase loan can fund the total acquisition cost including: goodwill (the brand, customer contracts and reputation value), plant and equipment included in the sale, stock and inventory at settlement, working capital to fund the business immediately after purchase, and stamp duty or legal fees associated with the transaction.
What Security Is Required?
Security requirements vary by lender and loan size. Many lenders will take a charge over the business assets being acquired as security. For larger transactions, a personal guarantee from the directors is typically required. Residential property security may unlock lower rates and higher loan amounts. Overdrive Funding identifies lenders with the right security appetite for each transaction.
How Is the Business Valued for Lending Purposes?
Lenders assess the earnings of the business being acquired — typically using EBITDA (earnings before interest, tax, depreciation and amortisation) multiplied by an industry-specific multiple. Most lenders apply a multiple of 2–4x EBITDA for small businesses. Well-established businesses in high-demand sectors may attract higher multiples. Our brokers have experience preparing acquisition finance submissions that present the deal in the best possible light.
How Long Does the Process Take?
Business acquisition finance typically takes 5–15 business days from application to settlement depending on the complexity of the transaction and the lender selected. Fast-track options are available for straightforward acquisitions. Overdrive Funding manages the entire submission and lender communication process so settlement proceeds on schedule.