Buying an Existing Business in Australia (2023–2025): How to Use Finance and Home Equity Safely
09 Dec 2025
Thinking about buying an existing business instead of starting from scratch? Learn why more Australians are choosing established SMEs, how banks really assess business purchase loans, when to use home equity, and the practical steps to structure a lender‑friendly deal in the 2023–2025 market.
Key Takeaways
- More Australians are buying established small and medium businesses in 2023–2025 to gain proven cash flow, customers and staff, and to avoid the high failure risk of start‑ups.
- Business purchase finance must cover goodwill, equipment, stock, working capital and transaction costs, with lenders expecting you to contribute via cash savings, business equity or property security.
- Lenders assess both the business and the buyer, looking for strong financials, realistic valuations, diversified revenue, relevant experience and clear evidence the loan can be serviced under stress‑tested conditions.
- Using your home as security can unlock cheaper, longer‑term business finance, but it puts your family home at risk if the business underperforms or cash flow weakens.
Why More Australians Are Buying Existing Businesses in 2023–2025
Buying an existing business is becoming a smarter path into self-employment for many Australians, especially in the 2023–2025 market. Instead of taking on the risk of a brand‑new start‑up, more buyers are targeting established small and medium businesses (SMEs) with existing customers, proven cash flow and trained staff.
Key drivers behind this shift include:
- Retiring baby boomer owners putting long‑held businesses on the market.
- Post‑COVID risk aversion, with buyers preferring predictable income over experimentation.
- A desire to skip the start‑up phase, where most new businesses struggle with cash flow and brand awareness.
Example scenario:
A professional couple in their 40s want to leave corporate roles and buy a business that can support their family. Rather than launching a new café from scratch, they purchase a 15‑year‑old local café with steady revenue, regular customers and reliable staff. They pay more upfront than a start‑up fit‑out would cost, but they avoid years of trial‑and‑error and uncertain income.
For buyers who value certainty, cash flow and lifestyle, established businesses are increasingly the preferred option. Before making a move, it can also help to review your personal finances and learn how to improve your credit score in Australia, as stronger personal credit can support your business finance application.
At the same time, the lending environment has changed significantly since 2022, which is reshaping how business purchases are structured.
How higher interest rates and tighter credit affect business buyers:
- Banks now focus heavily on cash flow, in addition to the story or potential of the business.
- Lenders are reluctant to fund 100% goodwill (the intangible value of the business name, customer base and reputation).
- Fully unsecured deals are much harder; banks often expect security, deposits or additional assets.
| Issue | What Buyers Expect | What Banks Prefer in 2023–2025 |
|---|---|---|
| Purchase price funding | 100% financed by the bank | Buyer contribution plus bank lending |
| Security | Minimal or no property security | Business assets and/or residential/commercial security |
| Assessment focus | Sales potential and Growth Story | Verifiable cash flow, serviceability and relevant experience |
This creates a valuation and funding gap: sellers often want top dollar for their life’s work, while banks will only lend against demonstrable earnings and solid security. The result is that more deals fall over unless buyers are strategic.
To move forward confidently, buyers should:
- Undertake detailed due diligence on financials, customer concentration, leases and staffing.
- Structure finance carefully, blending bank debt with deposits, vendor finance or partner equity.
- Engage a specialist mortgage and business finance broker to negotiate with lenders and align the deal terms with bank policy.
If you are considering buying an existing business, speaking with a broker early can help you assess the numbers, understand what the banks will really fund, and structure a finance solution that supports both the purchase and your long‑term financial stability.
How Business Purchase Finance Works When Buying an Existing Business
When you apply for business purchase finance to buy an existing business, lenders look well beyond the headline sale price. They want to see that the total funding covers all the moving parts of the transaction, not just the amount paid to the seller.
Here is what usually needs to be funded:
- Goodwill – the value of the brand, customer base, and reputation.
- Plant and equipment – machinery, fit‑out, vehicles, IT and other assets.
- Stock (inventory) – opening stock so the business can trade from day one.
- Working capital – cash buffer for wages, rent, marketing and supplier terms.
- Transaction costs – legal, accounting, broker fees and government charges.
Example (simplified):
A café in Brisbane is being purchased for $450,000:
- $320,000 goodwill
- $70,000 plant and equipment
- $40,000 stock
- $20,000 working capital and costs
Total funding required: $450,000 – not just the goodwill component.
Lenders typically expect you to contribute some of this from your own resources so you have “skin in the game”. That contribution can come from cash savings, existing business equity, or residential/commercial property security. Understanding what finance options are available can help you plan your contribution and structure, so it is worth reading about the different business finance options available for Australian businesses.
Most Australian lenders will not fund 100% of the business purchase price. They assess how much of the risk you are sharing and how easily the loan can be repaid from the business profits.
| Source of contribution | Typical role in the deal* |
|---|---|
| Cash savings | Forms part of the deposit / upfront costs |
| Equity in your home or investment property | Used as additional security to increase loan amount |
| Existing business equity | Can support higher gearing or better pricing |
*Exact requirements vary by lender, industry and your financial position.
Lenders will also test serviceability – whether the business can afford the repayments after wages, rent, tax and other outgoings. A strong trading history, realistic forecasts and conservative assumptions all help.
Well-structured business purchase finance should fund everything you need to take over smoothly, without leaving you short of cash in the first 6–12 months.
If you are looking at buying a business in Australia, it is worth speaking to a specialist mortgage and commercial broker early. They can help you map out the full funding need, your contribution, and lender options before you sign a contract or pay a deposit.
What Lenders Look For in Business Finance Applications: Assessment, Risks and Deal‑Killers
When you apply for a business purchase loan, lenders do not just look at the numbers on the application form. They deep‑dive into both the business you are buying and you as the buyer to decide if the deal is bankable.
Key areas lenders assess upfront:
- Business strength (2–3 years’ financials): Are sales and profits stable or growing? Are margins reasonable for the industry?
- Customer and revenue mix: Is income spread across multiple customers, or reliant on one or two big accounts?
- Purchase price: Is the price in line with recent sales, industry benchmarks and profit levels?
- Buyer profile: Do you have relevant industry or management experience, clean personal credit and a genuine cash contribution?
Lenders back strong businesses and capable buyers. If either side is weak, the deal usually gets downgraded or declined.
By tightening these areas before you go to market, you not only improve your chances of approval but also position yourself to negotiate sharper rates and terms.
Behind the scenes, lenders also stress‑test serviceability to see if the business can comfortably repay debt under tougher conditions, not just today’s rates.
They typically start with normalised earnings (after realistic addbacks) and test repayments at a buffered interest rate above current levels. If cash flow looks thin once tax, owner wages and working capital needs are allowed for, the loan size may be reduced or declined.
Higher‑risk sectors attract extra scrutiny – especially parts of hospitality, bricks‑and‑mortar retail, and businesses with highly seasonal trade.
Common deal‑killers that worry lenders include:
- Overpaying for the business – price not supported by profits or valuation metrics.
- Poor or incomplete financial records – missing BAS, hand‑written ledgers, or unexplained adjustments.
- No relevant industry experience – particularly in specialised or regulated sectors.
- Underfunded working capital – using every dollar for the purchase price and leaving no buffer for stock, wages and GST.
Managing your personal debts and commitments also matters. For example, understanding the difference between good debt and bad debt can help you structure both personal and business borrowing in ways that look stronger to lenders.
If you are planning a business acquisition, a mortgage and finance broker can review the numbers, flag lender concerns upfront and help you structure the deal to maximise your chances of approval.
Property-Secured Business Loans and Home-Equity Strategies in Australia
Using your home to secure a business loan remains one of the most common small business finance strategies in Australia. Property‑secured business loans and home‑equity loans usually offer lower interest rates and longer terms than unsecured options, which can be attractive for cash flow.
However, this structure effectively puts your family home on the line. If the business struggles and repayments fall behind, the lender can ultimately force the sale of the property to recover the debt.
Key points to consider before using home equity for business:
- Interest rate: Typically lower than unsecured business lending.
- Loan term: Often 15–30 years, which can ease monthly repayments.
- Security: Your home or investment property is used as collateral.
- Risk: Personal asset exposure if the business cannot meet repayments.
Example – home as security for a startup loan
Sarah wants to launch an online retail business and needs $300,000 for stock and setup costs. Her bank will only offer $100,000 unsecured at a higher rate. By using her home as security, she accesses the full $300,000 at a lower rate over 25 years. Her repayments are manageable, but if the business fails, her home is at risk if she cannot refinance or repay the debt from other sources.
Choosing a property‑secured structure means balancing cheaper finance against higher personal risk.
| Factor | Advantage | Risk / Drawback |
|---|---|---|
| Interest rate | Lower than most unsecured SME loans | Still variable and can rise over time |
| Loan term | Longer terms reduce monthly repayments | Debt may outlive the business itself |
| Approval likelihood | Easier if you have strong equity | Can encourage borrowing more than the business needs |
| Personal exposure | Can help you secure growth capital | Home may be sold if the loan goes into default |
When this structure may be suitable:
- You have stable income outside the business to support repayments.
- The funding is for long‑term assets (e.g. equipment, fit‑out, premises), not short‑term cash gaps.
- You have a clear exit plan, such as planned sale of the business or refinancing.
If you are already a homeowner, it may be helpful to review ways to manage and optimise your mortgage, such as learning how to pay your home loan off quicker. This can free up equity faster and strengthen your position if you later decide to use property as security for business purposes.
If you are considering using your home to fund your business, it is crucial to stress‑test your cash flow and explore alternatives. A mortgage broker can compare home‑equity loans, business loans and mixed structures to help you protect your assets while still achieving your growth plans.
Practical Steps to Secure Finance for Buying a Business in Australia
Start With a Clear Budget and Risk Profile Before You Buy a Business
Before you sign a contract to buy a business, you need a firm handle on how much you can safely borrow and how much risk you are comfortable taking on. Lenders and brokers will look closely at both your personal position and the business numbers.
Use the checklist below as a starting point:
- Personal budget: Understand your living costs, existing debts and how much surplus you can commit to loan repayments.
- Risk tolerance: Consider how comfortable you are with using your home as security, variable vs fixed rates, and possible income fluctuations.
- Pre‑qualification: Speak with a business finance or mortgage broker to gauge your borrowing capacity before you negotiate price.
- Deal structure basics: Think about how the price might be split between goodwill, stock, equipment and working capital.
The goal is to avoid falling in love with a business you simply cannot fund on sensible terms.
Make Your Offer Lender‑Friendly With Smart Deal Structuring
Once you have identified a business, professional due diligence and deal structuring can make or break your ability to secure finance.
A typical lender‑friendly structure may include:
- Price allocation: Clearly separating goodwill, plant and equipment, stock, and any intellectual property.
- Vendor finance: Negotiating the seller to carry 10–20% of the price, reducing the bank’s risk and your cash outlay.
- Working capital: Ensuring there is enough cash or an overdraft facility to cover wages, rent and stock in the crucial first 6–12 months.
Lenders are far more comfortable funding a well‑documented, sensibly structured deal than a top‑price offer with no buffer for surprises.
Work with your broker and accountant to test different scenarios (for example, lower purchase price vs higher vendor finance), then have your broker seek pre‑approval based on that structure. This improves your negotiating power with the seller and reduces the risk of the deal collapsing at the finance stage.
As you think through your overall debt position, it is also worth understanding how lenders view your assets and borrowing level through the lens of loan-to-value ratio (LVR) and its impact on interest rates. Keeping your LVR at sensible levels can help secure sharper rates on both home and business facilities.
For further reading on strengthening your personal position before a business purchase, explore how to improve your credit score in Australia and strategies for paying your home loan off quicker. To better understand how lenders see your borrowing, read about loan-to-value ratio (LVR) and interest rates, review the finance options available for businesses, and clarify the difference between good debt and bad debt.
Before signing a contract, define your budget and risk tolerance, complete thorough due diligence and speak with a specialist mortgage and business finance broker to map out funding options. That way, you can protect your long‑term financial stability while taking advantage of the opportunities in the 2023–2025 business acquisition market.
Disclaimer:
All information on this website is general in nature and not intended as financial, investment, legal, or tax advice. It may not suit your personal circumstances. You should seek independent professional advice before acting on any content. We accept no liability for actions taken based on this information.
