Can You Buy a Business With Little Money in Australia? Seven (7) Funding Options to Consider

Josh Foo

Aug 28

11 min read

Updated: 3 days ago

“How can I buy a business with little money or no money?”

Yes, it may be possible to buy a business with limited personal cash, but there is rarely a simple “no-deposit business loan”.

A transaction may sometimes be funded through a combination of acquisition debt, vendor finance, equity investment, deferred payments, asset finance or additional security. The viability of the funding depends on the buyer, the business being purchased and the transaction as a whole.

The more useful question is not simply:

It is:

A low-cash acquisition is usually a transaction-structuring challenge, not a standard loan product.

The short answer

Having little cash does not necessarily mean having nothing to contribute. Experience, property equity, other assets, an investor or an agreeable vendor may all affect the structure.
Business acquisition finance does not usually follow one standard deposit percentage.
A lender may assess the buyer, the business, the purchase price, available security and the complete transaction.
The funding plan needs to cover more than the purchase price. It may also need to provide for stock, professional costs and working capital.
Finance feasibility should be assessed before a buyer makes binding financial or legal commitments.

Can I get 100% finance to buy a business?

Some acquisitions may be structured with little conventional buyer cash, but this is not the same as a universally available 100% business acquisition loan. Availability depends on the buyer, business, transaction, security and lender policy.

Before discussing 100% funding, clarify exactly what needs to be covered:

Purchase price versus total funding: covering the sale price does not necessarily cover professional costs, stock adjustments, applicable taxes or duties, and working capital.
One lender versus blended funding: a purchase may use acquisition debt, vendor finance, equipment finance or investor funds. That is different from one lender providing the whole amount.
No cash versus additional security: borrowing against available property equity may reduce conventional cash required, but it creates another debt obligation and exposes the secured property.
Vendor finance versus buyer equity: a seller-payment obligation is not automatically accepted as the buyer’s contribution. A senior lender may require consent, repayment restrictions or subordination.

Illustration: funding the price is not funding the whole transaction

Assume, purely for illustration, a $500,000 purchase price, $25,000 in transaction costs and $50,000 in initial working capital. The total requirement is $575,000. Even if an acceptable combination of funding sources covered the $500,000 price, another $75,000 would still need to be provided.

These figures are hypothetical—not a loan offer, approved structure or standard contribution requirement. All repayments and future seller payments would still need to fit within sustainable cash flow.

What does “little money” mean when buying a business?

Two buyers with the same cash balance may be viewed very differently.

One buyer may have limited cash but substantial property equity, relevant industry experience and a strong income. Another may have the same cash but no additional security, limited experience and significant personal debt. The funding options available to them may not be the same.

It helps to separate four concepts:

Cash contribution: money the buyer can put into the transaction.
Security: property, equipment or other assets that may support borrowing.
Capability: the buyer’s relevant industry, management or ownership experience.
Support: vendor finance, an equity investor, a guarantor or another party contributing to the structure.

Limited cash may sometimes be offset by strength elsewhere, but it does not remove the need for the transaction to make commercial sense.

What may a lender assess when financing a business purchase?

Unlike a home loan, business acquisition finance is not based only on the borrower and a tangible property.

Depending on the lender and transaction, the assessment may include:

historical and recent business earnings
whether those earnings appear sustainable
cash flow available for loan repayments
the purchase price and business valuation
customer or supplier concentration
reliance on the departing owner
the buyer’s industry and management experience
available property or business-asset security
the buyer’s contribution and remaining liquidity
working-capital requirements
the proposed ownership and legal structure
the terms of any vendor finance or deferred payment.

There is no universal formula that applies to every lender or acquisition. An attractive business may still be difficult for a particular buyer to finance, while a capable buyer may not make an unsuitable business financeable.

Seven ways a business purchase may be funded with limited cash

1. Use a business acquisition loan

A business acquisition loan may provide part of the purchase price, subject to the lender’s assessment.

The lender may consider the business’s cash flow, assets, industry, purchase price and transition risk, as well as the buyer’s financial position and experience. Banks and non-bank lenders can have different appetites, security requirements and loan terms.

There is no standard percentage that every lender will provide. A lender might fund a larger proportion of one acquisition than another acquisition at the same price.

This is why a preliminary discussion can be useful, but it should not be mistaken for a home-loan-style approval that applies to any business the buyer chooses.

2. Negotiate vendor finance

Vendor finance is an arrangement in which the seller allows part of the purchase price to be paid after settlement.

For example, instead of receiving the full price on settlement day, the vendor may receive an initial payment and lend or defer the balance for an agreed period.

Vendor finance may reduce the amount of cash and external debt required at settlement. It can also demonstrate that the seller retains some financial exposure to the business after the sale.

However, it is not automatically treated as the buyer’s contribution. A senior lender may want to approve the arrangement and may require particular repayment, security or subordination terms.

The parties should obtain legal, accounting and taxation advice covering matters such as:

interest and repayment dates
security and priority
restrictions on early repayment
default provisions
guarantees
what happens if the business underperforms.

For more detail, see Fairlane Finance’s guide to vendor finance in a business sale.

3. Use deferred consideration or an earn-out

The seller may agree that part of the price will be paid later or calculated by reference to future performance. A deferred fixed payment is different from an earn-out. An earn-out generally makes some of the payment conditional on the business reaching agreed performance measures after settlement.

These arrangements may reduce the cash needed on settlement day and can help bridge a valuation gap between buyer and seller. They can also create legal, operational and measurement risks.

The wording needs to be precise. The parties may need to agree on how earnings are calculated, who controls the business, what information the vendor receives and what happens if the buyer changes the way the business operates.

A proposed senior lender should be told about the arrangement, because the future payment obligations may affect its assessment.

4. Bring in an equity investor or co-buyer

Australian Government guidance distinguishes debt finance (money borrowed from a lender) from equity finance, where funding is exchanged for part ownership of the business.

An investor or co-buyer may contribute capital and reduce the amount that needs to be borrowed. They may also bring relevant experience, relationships or management capability.

The trade-off is that the buyer gives up part of the ownership and may need to share control and future profits.

Before proceeding, the parties should document:

ownership percentages
decision-making rights
salaries and distributions
additional funding obligations
exit rights
restraints and dispute procedures
what happens if one party can no longer work in the business.

A properly prepared shareholders or partnership agreement is important. Independent legal, accounting and taxation advice should be obtained.

5. Use available property or other security

A buyer with little cash may still have equity in residential or commercial property or other assets. Depending on the transaction and lender, additional security may support a larger loan or alter the funding structure. It does not make the acquisition less risky or remove the repayment obligation.

If personal property is offered as security, that property may be at risk if the loan cannot be repaid. Buyers should understand the guarantees, security documents and potential consequences before proceeding.

Using property equity is not appropriate for every buyer. The decision should be considered with independent professional advice.

Can I buy a business without using my home as security?

Potentially. Some acquisitions may be considered using business-backed lending or finance secured over eligible business assets rather than a mortgage over your home. The available options depend on sustainable earnings, purchase terms, buyer capability, contribution and lender requirements.

A mortgage over the home gives the lender security over that property.
Security over business assets may cover equipment or broader business assets, subject to the documents.
A personal or director guarantee can create personal repayment liability even where the home is not specifically mortgaged.

No mortgage over your home does not necessarily mean no security or no personal exposure. If personal liability is enforced, personal assets may still be affected. Obtain independent legal advice on security documents, guarantees and the consequences of default.

For a sector-specific example, read Can You Buy an Accounting Practice Without Property Security? Accounting-practice lending is not a rule for every business type.

For general information on guarantee risks, see Moneysmart’s guide to going guarantor.

6. Finance eligible equipment separately

Some businesses include identifiable vehicles, machinery or equipment that may potentially qualify for asset finance. If a lender is willing to finance those assets separately, this may preserve some cash or acquisition-loan capacity for goodwill, stock and other parts of the transaction.

This will depend on factors such as:

the type, age and condition of the assets
their ownership and value
whether existing finance must be discharged
the useful life of the equipment
the lender’s asset-finance policy.

Asset finance will not normally solve a funding gap associated entirely with goodwill, and its repayments still need to fit within the business’s total cash flow.

7. Buy a smaller business or stage the acquisition

Sometimes the most commercially sensible solution is to change the transaction rather than increase the debt.

Possible alternatives may include:

acquiring a smaller business
buying an initial interest and acquiring the balance later
having the vendor retain a minority interest for a period
purchasing selected assets instead of the entire entity
negotiating a longer transition before full ownership passes.

A staged structure can introduce additional legal, control and lender considerations. It should not be implemented without coordinated finance, legal, accounting and taxation advice.

However, reducing or reshaping the transaction can sometimes be more realistic than trying to fund a purchase that leaves no margin for error.

A hypothetical low-cash funding structure

Assume a business is priced at $500,000, and the buyer expects another $50,000 for professional costs and initial working capital.

The total funding requirement is therefore $550,000.

An illustrative structure might be:

buyer cash: $50,000
business acquisition loan: $300,000
vendor finance: $100,000
equity investor: $100,000

Total funding: $550,000

This example is deliberately simplified. It does not mean a lender would accept those amounts or treat each source in the same way.

The lender would still need to assess whether the business can service the proposed debt, whether the buyer is suitable, whether the purchase price is supportable and whether the vendor-finance and equity terms are acceptable. The equity investor would also receive an ownership interest, and the vendor-finance repayments could place additional pressure on cash flow.

The purpose of the example is to show how several funding sources may sometimes be combined—not to suggest that a particular contribution level is generally available.

Do not overlook working capital

Reaching settlement is not the finish line.

The business may need cash immediately for:

wages
rent
suppliers
inventory
insurance
marketing
tax obligations
seasonal fluctuations
unexpected costs.

A buyer who commits every available dollar to the purchase price may acquire a profitable business and still face a liquidity problem shortly afterwards.

The funding plan should therefore consider both:

the capital required to acquire the business; and
the working capital required to operate it after settlement.

What is unlikely to solve the funding gap?

Buyers should be cautious about relying on:

a supposed universal “no-deposit business loan”
government grants without checking whether acquisition costs are eligible
optimistic forecasts unsupported by historical performance
seller earnings adjustments that a lender may not accept
undisclosed personal loans or credit cards for the contribution
using every available dollar and leaving no liquidity buffer
a home-loan-style pre-approval before the target business is known
an unconditional offer made before funding feasibility is assessed.

More debt is not always the solution. If the combined repayments cannot be supported by sustainable cash flow, adding another facility may make the transaction less viable.

How to improve the prospects of financing the purchase

Assess your position before searching too narrowly

Review your available cash, assets, liabilities, property equity, experience and likely working-capital needs. This can help define the size and type of acquisition that may be realistic.

Request reliable business information

Independently check the financial information of a business before purchase, including financial statements and records from the previous three to five years.

Relevant documents may include:

profit and loss statements
balance sheets
tax returns and BAS
cash-flow statements
sales records
accounts receivable and payable
leases, contracts and asset registers.

Due diligence should also include legal and operational matters. Relevant assets and possible security interests can be checked through the Personal Property Securities Register where appropriate.

Prepare a clear buyer case

A lender may want to understand why you can operate the business successfully after the vendor leaves.

A concise buyer profile can address:

relevant industry experience
management and leadership history
qualifications and licences
transferable skills
proposed role after settlement
plans for retaining staff and customers
vendor handover arrangements.

Model the complete transaction

Include the purchase price, stock, professional fees, taxes or duties where applicable, working capital and any immediate capital expenditure.

Then model repayments under the proposed acquisition loan, vendor finance and other facilities. Allow for downside scenarios rather than relying only on the seller’s forecast.

Keep the offer appropriately conditional

Before signing, obtain legal advice on conditions relating to finance, due diligence and other approvals. Ensure the proposed timetable allows enough time for commercial finance assessment.

Frequently asked questions

Can I get a business loan with no deposit?

There is no universal no-deposit product or standard contribution for every business acquisition. Some transactions may potentially be structured with limited conventional cash where there is strong cash flow, additional security, vendor support or equity funding. Availability depends on the buyer, business, structure and lender policy.

Can vendor finance count as my deposit?

Not automatically. A buyer shouldn't count on vendor finance as a "deposit". A lender may consider vendor finance as part of the overall funding structure, but it may impose requirements concerning repayment, security, priority and subordination. The treatment varies by lender and transaction.

Do I need to own property to buy a business?

Not in every case. Some acquisitions may be considered on the strength of the business, buyer and available business assets. Other transactions may require property or additional security. Lender appetite varies considerably.

Can a first-time buyer obtain acquisition finance?

Potentially. A first-time owner may still have relevant industry, management or professional experience. The lender may want to understand how the buyer will maintain the business’s customers, staff, operations and cash flow after settlement.

Can the acquired business repay the loan?

The business’s sustainable cash flow may be central to the assessment, but the seller’s advertised profit is not necessarily the figure a lender will accept. Historical financial information, adjustments, future working-capital needs and all proposed debt obligations may be reviewed.

Can I obtain pre-approval before finding a business?

A preliminary assessment may help establish a realistic search range, but it is generally not equivalent to a home-loan pre-approval. The lender will normally need to assess the particular business and transaction before making a decision.

Assess the finance before you commit

Buying a business with less money may be possible in some limited circumstances, but the structure must still be commercially sound. And the funding structure will need to answer a key question from lender, "does the buyer have enough skin in the business?"

The strongest approach to any business acquisition funding is usually to assess the buyer, target business and complete funding requirement together. Acquisition debt, vendor finance, equity and deferred payments may each play a role, but every additional layer creates its own obligations and risks.