Business Acquisition Lending
Funding to buy a business.
Buying an existing business can be one of the fastest ways to grow, but funding a business purchase is different to a standard loan.
Business acquisition lending is primarily based on the strength of the business itself - including its profitability, cashflow and ability to service the debt.
In most cases, funding comes from the main banks, provided the business is stable and the purchase makes sense. Lenders also consider the experience of the buyer, the industry and how the purchase is structured.
At Vive Capital, we help position business purchases for funding and work with banks and other lenders where appropriate to get the transaction through.
How business acquisition finance works
Business acquisition lending is typically based on the cashflow of the business being purchased. Lenders want confidence that the business can generate enough income to cover loan repayments and ongoing operating costs.
Assessing business cashflow
This usually involves reviewing:
Historical financials
EBITDA (Earnings before interest, tax, depreciation and amortisation) or net profit
Add-backs and adjustments
Debt servicing ability
Working capital requirements
Purchase price relative to earnings
Lenders also look closely at how the purchase price compares to earnings, often using an EBITDA multiple.
For example, a business earning $500,000 in EBITDA purchased for $1,500,000 represents a 3x multiple.
Lower multiples are generally lower risk, as the debt can be repaid faster from business cashflow. Higher multiples increase risk and may require more equity or a more structured approach.
If the fundamentals are strong, banks may fund a portion of the purchase price.
Goodwill v tangible assets
The funding structure often depends on how the purchase price is split between goodwill and tangible assets.
Where a business has strong tangible assets, such as plant, equipment or property -
banks are generally more comfortable providing higher lending.
Where the value is largely goodwill, lenders take a more conservative approach. Goodwill relies on ongoing performance, customer retention and management continuity, which increases risk.
This is why two businesses with the same purchase price can have very different funding outcomes.
Deposit requirements
Deposit requirements depend on the strength of the business and how the purchase is structured.
As a general guide, buyers typically need between 30% – 50% of the purchase price as equity.
Higher deposits are more common where:
Goodwill makes up a large portion of the purchase price
Earnings are volatile
Industry risk is higher
Buyer experience is limited
EBITDA multiple is higher
Lower deposits may be possible where:
Cashflow is strong and stable
Tangible assets support the purchase
Additional security is available
Vendor support is included
The purchase price is sensible
Equity contributions can come from:
Cash
Property-backed equity
Vendor finance
What drives funding outcomes
Business acquisition lending is driven by the strength of the business.
A stable business with consistent earnings, a sensible purchase price and a clear transition plan will generally result in better funding outcomes and access to bank funding.
Higher-risk acquisitions or goodwill-heavy purchases may require more equity, additional security or alternative lending structures.
Talk to us early - When to apply for funding/ seek options
It’s best to look at funding early in the process. This helps you understand borrowing capacity and structure the acquisition correctly.
We can help when you are:
Assessing a business opportunity
Negotiating a purchase
Reviewing financials
Structuring a buy-in
Preparing an offer
Acquiring a competitor
Planning a management buyout
Early planning often creates more funding options.
Discuss your project
If you're considering buying a business, we can help you understand how the funding may be structured and what lenders are likely to look for.