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Finance to Purchase an Existing Business

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Getting a loan to buy an established business

Written by

Shaun McGowan

Using business finance to purchase an existing, established business is a popular alternative to starting a business from scratch. You’ll need to do exhaustive research into the business and everything that enables its current operation, but doing so will improve your chances of gaining approval for a loan and put you in the best position to continue operations and encourage growth into the future.

In Summary:

  • Own your own business
  • Don’t need to set up a business from scratch
  • Start operating immediately
  • Established customer base
  • Existing systems, facilities, equipment
  • Clear budget in setting up
  • No delay on business operations
  • More expensive up-front amount to purchase
  • Need to understand profit and loss for the business
  • Need to extensively research the business (can be difficult for first-timers)
  • Need to ask a lot of questions and be sure you understand why the business works
  • Need to understand if current ownership is the driving force behind profit — i.e. owner-supplier relationships, customer relationships

Key Features

  • Borrow from $5,000 to $500,000
  • Fixed or variable interest rates
  • Repayments to suit your budget
  • Terms from one month to five years
  • Secured & unsecured options
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Who is eligible?

  • Own a business and have an ABN
  • Business is GST-registered
  • Permanent Citizenship or Residency
  • Minimum business-operating time of six months
  • Can provide business bank statements
Minimum requirements for a business loan

Shopping around

Shopping around for the right loan can save you thousands of dollars in interest and fees.

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How to buy an existing, established business

Building a business from the ground up is no easy task — one solution to this approach is to purchase an existing business. According to ASIC (Australian Securities & Investments Commission) 192,407 new businesses registered in Australia between January and October 2019. The number of businesses in Australia is increasing annually, as more Australians fulfil their dream of owning their own business. Here’s how you can do it.

The simple answer to who can buy an existing business is: anyone. The better question is: how does someone buy an existing business? The answer to this will depend on a number of factors, including:

  • The type of purchase you wish to make — are you buying out a competitor, or buying a company to expand your current business operations?
  • Your business and industry experience — are you new to business or do you have experience in the industry you wish to buy into?
  • How you plan to finance your purchase — will you look to friends and family, investors and crowd-funding to obtain finance, or will you borrow money from a bank or alternative lender?
  • Your personal borrower profile if applying for a loan — Do you own a home or commercial property that you can use as collateral or are you planning to finance a business without any money or security to use on a loan?

Your next step will depend on how you answered these questions. For example, purchasing an existing business without any personal industry experience of your own will require you to do much more pre-purchase planning and research than if you are buying out a competitor business.


Secured Business Loans

Secured business loans are the most economical option for purchasing an existing business. To get the best rates on a secured business loan, you’ll apply through your bank — keep in mind that banks will have strict lending criteria, and applying for a business loan through a bank will be a lengthy process.

To apply for a secured business loan, you’ll need assets to use as collateral, such as your home. You’ll also need to provide full financial statements for the business you wish to purchase, your own personal business and strategic plans, and detailed information about the existing business, customers, and market it operates in.

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Unsecured Business Loans

Unsecured business loans have higher rates of interest than secured loans, but are usually easier and faster to get approval for, especially if you aren’t applying through your bank.

Specialist finance lenders offer speed, flexibility and access to finance that isn’t offered by traditional banks and their rigid approval criteria, which is why unsecured business loans are increasingly popular in Australia.

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Equipment Finance

Equipment finance refers to specialist lender loans that are used to purchase vehicles, equipment and machinery for a business. However, if you are purchasing an existing business that already owns significant assets with a high value, it’s possible that you could borrow against these to acquire the finance you need for the purchase of the business.

There are conditions applied to equipment loans, and you’ll need to ensure that you understand any restrictions on your ability to sell or upgrade the equipment throughout the loan term set by the lender.

To apply for a secured business loan, you’ll need assets to use as collateral, such as your home. You’ll also need to provide full financial statements for the business you wish to purchase, your own personal business and strategic plans, and detailed information about the existing business, customers, and market it operates in.

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Find the best rate on a loan to purchase an existing business


How to assess a business that is up for sale

Once you’ve found an existing business you are interested in purchasing, the first thing you’ll need to do is ask questions. Ideally, the vendor will be selling the business because it is profitable and they want to cash out while their business is doing well. However, it’s difficult to find a perfect business without any faults, which is why you need to assess all aspects of its operations before moving toward making an offer.

Important considerations and questions to ask

Never be afraid to ask questions when you’re seriously considering purchasing an existing, established business. The answers to these questions could help you negotiate a lower purchase price, or help identify critical issues that may influence your decision to purchase the business at all.

Why is the vendor selling the business?

Ideally, the owner will either be looking to retire or cash out to pursue other interests. This is an important question to ask as it could help identify issues with the business that may affect your future operations.

If the owner is selling because they need to clear debt, which kind of debt is it? Is it a debt taken out by the business, or personal debt? If the owner has taken on personal debt to fund the business, this could be a major red flag.

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Is there a rush to sell the business, and why?

Similar to the reason for selling the business, is the owner looking to make a quick sale? There could very well be legitimate reasons for wanting to cash out — such as moving overseas, or a limited-time opportunity to start another business — but you’ll want to make sure this isn’t a tactic to rush a sale to avoid scrutiny of the business accounts.

On the plus side, if there is a legitimate reason for the rush to sell, you could leverage this to have the owner accept a lower price.

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Is the business being sold in full or in part?

This is an important consideration if you’re purchasing the business to gain complete control and freedom in how you operate. In the case of a part sale, it’s more likely that the business owner wants to continue receiving some benefit from the business in the form of stable income, while relinquishing control of the daily operations.

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How to determine if a business is worth purchasing

Once you have a clear picture of the business and how it will continue to operate following your purchase, you’ll need to make a current assessment of the business by speaking with employees, customers, market experts, and by studying the financials and company business plan.

Visit the business and speak to employees and customers

Employees will be the driving force behind business operations, but customers will be the people you depend on for revenue and profit.

Visit the business and speak to customers, ask them what they like and dislike about the business, or if there have been any changes in how the business operates recently. Is there loyalty to specific employees, the current owner, or how the business or brand operates?

Understand the market

Ideally, you’ll want to purchase an existing, established business in an industry you are familiar with. If you don’t understand the market that business currently operates in, then you’ll need to do extensive research to ensure you have no misconceptions once you take over.

Look at competitors, both locally and overseas, and see how the business compares.

  • What is it doing differently to stand out and continue thriving?
  • Are there new products or services being introduced overseas or in the local market that may be disruptive to the current business plan?

This stage will need to be as exhaustive as the next — which is taking a detailed look at the business financials.


There are three key financial statements used by businesses:

  • Balance Sheet — a current view of business finances
  • Profit and Loss Statement — business performance over a period of time
  • Cash Flow Statement — income and expenditure, this will show money coming in and money going out, and will help identify issues with the business that may be preventing growth

Even if you have lengthy experience with examining financial documents, you will want to engage outside experts to provide comparative opinions. You may wish to speak to accountants, auditors, financial analysts, budget analysts, and forensic accountants to uncover any irregularities or concerns in the business’s finances.

Buying an existing business is no small task — it will require dedication and commitment in both the research and running of the business to ensure you make a profit.

The main hurdles when deciding to purchase a business — as opposed to a franchise — will be a large up-front purchase amount, and a vital need to understand the business and how it operates at the most granular level.

You’ll need to have a crystal-clear picture of:

  • How much money you’ll need to maintain consistent operation of the business
  • Current business profits, and how this may affect your cash flow over time
  • How the business is expected to perform in the short, medium, and long-term
  • The industry the business operates in, and the ability to anticipate any changes that may affect the business in the future

However, owning a business is the ultimate working freedom; if you understand the market you operate in and have a solid work ethic, you can run your business exactly the way you choose to and, hopefully, make a consistent profit.

Find the best rate on a loan to purchase an existing business


How to qualify and apply

You can apply for finance to purchase an existing business from a number of different lenders. Other methods to obtaining finance include engaging a finance broker, or using a Peer-to-Peer (P2P) Lending platform which will connect you with investors.

How to qualify for a loan in Australia

The main lenders who will consider approving finance for the purchase of an existing business include:

  • Banks
  • Non-bank lenders
  • Specialist finance lenders

Each lender will have specific criteria for approval, and will be more or less suitable depending on your personal situation and how quickly you need access to funding. You can read our guide to learn more about how to compare business loans when looking to purchase an existing business.

Lenders will assess your application based on a number of different factors. Banks, for example, will require much more information than a P2P Lending intermediary, and the type and size of loan you apply for will also dictate your eligibility with certain lenders.

A good starting point is to collate the following information using the research and planning you’ve undertaken in assessing the suitability of an existing business for purchase, including:

  • The structure of the existing business
  • The location of the existing business
  • The industry the business operates in, and how long it has been operating
  • The turnover and profit of the business
  • The value of any assets owned by the business
  • Any current debts or loans taken out by the business
  • A detailed business plan stating how acquiring the business will enable you to repay the loan amount

Your business plan will be a crucial aspect of this process, both for you and the lender, and should clearly outline:

  • A deep understanding of the industry, market and competitors relevant to the existing business
  • The position of the existing business within the market and its future
  • Any significant challenges faced by the business, and detailed strategies that will ensure you are able to identify and solve any problems that arise
  • Clear and transparent figures relating to business turnover and cash flow, and how you plan to manage cash flow to maintain or improve profits for the business
  • Short, medium, and long-term business goals, including the timeframes for reaching each and how you plan to measure business performance to monitor and adjust goals as required
  • How you plan to operate the business, to both ensure you make the most of current resources and assets, and remaining competitive in a changing market

While this is a good start for your business plan, it’s important to remember that this process should be exhaustive; committing to owning a business — even an existing, profitable business — will be a demanding exercise.

The better you understand the position of the existing business both now and in the future, the more likely you are to be successful in gaining finance approval, and ensuring smooth operation once you’ve completed the purchase.

Here are the most popular questions people are asking about financing an existing, established business:

Buying an existing business can be a good way to acquire an established company and avoid set-up costs. You will have to do extensive research on the business first to ensure you are making a good financial decision, and there are risks involved in buying an existing business — such as not understanding the market it operates in.

There are benefits to buying an existing business over starting your own. You may be able to acquire a business that already has established processes and regular income streams. You could also benefit if the existing staff will stay on following the change of ownership.

To purchase an existing business you will have to find a business for sale and acquire the finance needed to pay the vendor (seller) the amount they wish to sell for. There are many other steps involved, but the first steps will involve assessing the financial health of the business and its suitability for purchase.

The cost to buy a business will vary depending on the amount wanted by the seller of the business. There are loan options available to help with financing your purchase and, depending on the assets included with the business, you may be able to offset some of this initial capital through various types of secured finance.

Yes, you can get a business loan to buy an existing business. You will need to first meet lender criteria for loan approval, and fully understand the amount you need to borrow to finance the purchase and continued operation of the business under your ownership.

About the Author

Shaun McGowan from



Shaun McGowan

Shaun is the founder of and is determined to help people pay as little as possible for financial products. Through education and building world class technology. Previously Shaun co-founded and Lend.