What Should You Check Before Signing Acquisition Loan Documents?
Updated: Oct 24
Before signing acquisition loan documents, check who is committing, what the facility costs, what secures it and what still needs to happen before funds can be released.
Acquisition loan documents turn a funding proposal into detailed commitments. For an Australian accounting practice buyer, the review needs to connect the facility with the purchase, your chosen entities and the cash flow you expect after taking ownership.
The arrival of a signing pack can feel like the finish line.
It is a good moment to slow down: an approval, a signed document and money available for settlement are different milestones. Your solicitor explains the legal obligations, while your acquisition finance adviser can clarify the funding structure and coordinate questions with the lender.
Checking acquisition loan documents: the short answer
Check the borrower, guarantors, security providers and signing capacities.
Match the amount, purpose, rates, fees and repayments against the current approved facility.
Understand security, guarantees and obligations that continue after settlement.
Confirm outstanding release conditions and follow the actual signing instructions.
Raise discrepancies before signing and obtain confirmation of the next funding step.
Who is borrowing, guaranteeing and providing security?
Start with the names rather than the interest rate.
Check legal names, relevant identifiers and addresses across the facility agreement, guarantees, security documents and purchase paperwork. If a company acts as trustee, ask your solicitor to confirm how its capacity should appear. The practice’s familiar trading name does not answer every entity question.
ASIC’s company guidance explains that a company has its own property, rights and obligations as a separate legal entity. For your review, identify which entity buys the business, which borrows and which provides security. Ask your solicitor to explain any difference between those roles.
The distinction between buying an accounting practice and buying a fee book matters here. What you acquire should connect sensibly with the documented borrower and funding purpose.
Tell your acquisition finance adviser about any proposed entity change so the lender can confirm its position before you proceed.
Does the signing pack match the approved facility?
Use the current written approval and facility summary as comparison material. Check the version and date, then raise differences in the documents rather than assuming an earlier email settles them.
Ask which document records the operative term and have your solicitor explain how the documents work together.
business.gov.au’s business loan guidance identifies loan amount, term, interest type, charges, security and restrictions as matters to compare. Translate those headings into a practical question: does this pack describe the finance you believe you are accepting?
Amount and permitted purpose
Confirm each facility limit, what it can fund and how it will be paid out. A purchase facility may not cover every transaction cost or operating expense.
Ask whether fees are deducted from proceeds or paid separately, and reconcile the amount available with your contribution and settlement payments.
Where the purchase includes vendor finance or deferred consideration, identify those payments separately. Ask how they interact with the lender’s documented requirements. An amount due later remains part of your commitments even when it sits outside the acquisition loan.
Rate, fees and repayment mechanics
Read the rate provisions alongside the repayment schedule. Check whether the rate is fixed or variable, how any stated margin and reference rate operate, when interest starts and when the first repayment falls due. Ask about establishment, ongoing, legal, valuation and early repayment charges where relevant.
Understand the term, repayment frequency, principal repayment pattern and any final balance. Have unclear calculations explained rather than filling gaps with an estimate.
If an interest-only period is included, ask what happens when it ends and use the documented repayment structure in your forecast.
Bring that forecast back to the financial information requested for the acquisition. A repayment that looks manageable against annual profit may place different pressure on a month with payroll, tax and slow collections. Your accountant can help assess that timing using the actual terms.
What do security and guarantees commit you to?
List every security document and guarantee in the pack. Identify the provider, assets described and obligations covered.
Ask your solicitor to explain scope, limits, continuing effect, default provisions and the process for any future release. Do not infer the extent of a commitment from its document title.
The PPSR’s explanation of security registration says the register can show security interests over personal property, including company assets. Ask your solicitor how any proposed registration relates to the security agreement and whether existing interests need attention. A registration and the underlying agreement require consideration together.
The discussion of buying an accounting practice without property security is useful context, but your documents determine the proposed arrangement. The absence of a property mortgage does not tell you whether a personal guarantee or security over business assets is included.
Give each guarantor space to understand their own position. Ask your solicitor whether separate independent advice is required or appropriate and follow any specific advice requirements in the pack.
A family relationship or shared business plan does not replace that review.
What remains before release, and after settlement?
Ask for a current list of conditions before funds can be released, with an owner for each outstanding item. Depending on the actual facility, these may concern equity evidence, insurance, security, purchase documents or other information.
Check what must be supplied and what requires lender acceptance.
If premises documents are involved, the lease due diligence for an accounting practice should feed into this conversation. Sending a lease document does not establish that the lender has accepted it. Ask your acquisition finance adviser to clarify the current status and any remaining questions.
Read beyond settlement. Ask about financial reporting dates, information requests, insurance, financial covenants and restrictions on using funds or changing the business where these appear.
Your solicitor should explain the obligations and consequences, while your accountant can help plan the reporting work. Record who will monitor each requirement.
Follow the signing instructions and resolve wrong details
business.gov.au’s legal essentials guidance encourages understanding contracts before signing. Give your solicitor the complete current pack, including schedules and incorporated terms. Ask for explanations of obligations you cannot describe in your own words, particularly guarantees and default provisions.
Check who signs each document, in what capacity, and whether identity verification, witnessing or independent advice steps apply. You should follow the instructions provided for your documents and signing method, because the requirements can differ.
If a name, amount or other detail is wrong, raise it before signing and obtain the corrected version or written clarification through the appropriate adviser.
After returning the pack, confirm receipt, whether execution has been accepted and what remains outstanding. Keep complete copies of the final documents.
A returned signature page should not become the basis for telling the vendor that settlement funds are ready.
An illustration: the purchase amount is right, but the purpose differs
Suppose a buyer expects one facility to pay the vendor and cover initial operating costs. The documents instead describe acquisition funding only, while the buyer’s forecast relies on spare proceeds for payroll. This is an illustrative mismatch, not an example of a particular lender’s policy.
The buyer raises it with your acquisition finance adviser and their solicitor before signing. The lender needs to clarify the permitted use and any proposed change, while the buyer also needs to revisit their contribution and working capital.
A correct headline amount has not answered how the money may be used.
Frequently asked questions
Does approval mean funds are ready for settlement?
No. Check the approval’s conditions and the current release position. Documents, security and other requirements may remain outstanding. Obtain a clear update before making settlement assumptions.
Can your acquisition finance adviser explain every legal clause?
Your acquisition finance adviser can clarify the finance structure and coordinate lender questions. Your solicitor should interpret legal obligations, guarantees, security and the consequences of particular clauses.
Should I sign if the borrower name is wrong?
Raise the discrepancy before signing. Ask your solicitor and your acquisition finance adviser to help obtain the appropriate correction and confirm whether the lender needs further information.
Does sending a requested document satisfy a condition?
Do not assume so. Confirm whether it has been received, reviewed and accepted for the relevant requirement, and whether anything further is needed.
Can I use unused acquisition funds for working capital?
Check the permitted purpose and drawdown terms. You should ask for clarification before relying on unused proceeds, because the arrangement depends on the documented facility and lender confirmation.
Sign with a clear understanding of the next step
A useful review leaves you able to identify the parties, payments, security, continuing obligations and outstanding release steps. Resolve uncertainty while the documents are still in front of you, and keep the legal review and funding conversation connected through to settlement.
Considering Buying an Accounting Practice?
Your acquisition finance adviser can help clarify your acquisition funding structure and coordinate outstanding lender questions before you sign.
General information only. This article does not constitute financial, credit, legal, tax, accounting, compliance or valuation advice. Finance is subject to lender approval, eligibility criteria, terms, fees and conditions. Consider obtaining independent professional advice for your circumstances before acting.
