Acquisition & franchise
Buying a business? Finance the acquisition properly.
Acquisition lending is where preparation pays most: lenders are financing a business you don't run yet, so the file has to prove the earnings are real and you can hold them. Get the structure right and the target's own cash flow does the heavy lifting.
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- Acquisitions, buy-ins, partner buyouts and franchise purchases
- Funding typically blends lender debt, your equity and sometimes vendor finance
- Franchise systems with track records unlock dedicated lender programs
What lenders fund, and how much.
Expect lenders to fund roughly 50-70% of a business purchase against the business itself, more where property or strong security is in the mix, less for goodwill-heavy deals. The gap comes from your equity, and sometimes vendor finance. A seller leaving money in the deal is also the strongest signal the earnings are real.
Franchises of established systems often do better: majors run dedicated franchise programs with higher gearing for proven brands, because the system's numbers de-risk the purchase.
The file that gets funded.
Strong acquisition applications share the same skeleton:
- Three years of the target's financials, and the story behind any adjustments (add-backs: directors' wages, one-offs, personal expenses)
- Your experience in the industry, or the management staying on
- A sensible price against maintainable earnings (lenders sanity-check the multiple)
- Working capital planned from day one, not discovered in month two
How lenders size the loan.
Business valuations for lending start with maintainable earnings: the profit a new owner can rely on, after honest add-backs. Lenders then fund a portion of the price, typically 50-70% against the business itself, with the rest from your equity, property security or vendor finance. Goodwill-heavy businesses, where the value walks out the door each night, gear at the low end; businesses with property, equipment or contracted revenue gear higher.
They also sanity-check the price: earnings multiples vary by industry, and a deal priced far above the going range gets questioned no matter how good the story. If the multiple only works with heroic growth assumptions, expect the lender to fund the business as it is, not as the pitch says it will be.
A worked example: funding a $1,000,000 purchase.
An example with checkable arithmetic. You buy a business for $1,000,000. A lender funds 60% against maintainable earnings: $600,000. You contribute $300,000 of equity (cash or a home-equity release), and the vendor leaves $100,000 in as vendor finance over two years. Together that covers the full $1,000,000, and the vendor's stake doubles as their vote of confidence in the numbers they sold you.
On top of the price, you want working capital from day one: stock, wages and the quiet first quarter while customers meet the new owner. Sizing that buffer into the facility at the start is far cheaper than arranging emergency funding in month three.
The process and timeframes.
Acquisitions have more moving parts than any other loan, and the finance is rarely the slowest one:
- Indicative funding capacity first, before you negotiate: it sets your realistic price range
- Due diligence with your accountant (LINK Advisors do this daily): financials, add-backs, contracts, the lease
- Formal application once terms are agreed: credit approval commonly takes two to four weeks
- The long poles: landlord consent to assign the lease, franchisor approval, licences transferring
- Settlement aligned with the business sale contract, with working capital live from day one
Who acquisition lending suits, and who it doesn't.
The deals that work share a pattern: a buyer with experience in the industry (or key management staying on), a business whose earnings survive scrutiny, and a price the multiple supports. Lenders fund those deals willingly, and the target's own cash flow carries the debt.
Be honest about the other pattern: buying a job. If the business's earnings are really the owner's wage for working sixty-hour weeks, you're buying employment with debt attached, and the servicing rarely stacks up once a market wage is paid. We run that test early, before you've fallen for the deal, because the kindest thing a broker can say is sometimes 'don't'.
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Frequently asked questions.
How much deposit do I need to buy a business?
Commonly 30-50% of the purchase price in equity, less where property secures the deal or a strong franchise program applies. Vendor finance can bridge part of the gap, and its presence reassures lenders.
What are add-backs and why do they matter?
Add-backs adjust the target's profit to show its true earning power for a new owner: directors' wages above market rate, one-off costs, personal expenses through the business. Lenders scrutinise them hard; realistic add-backs supported by evidence are the difference between a fundable file and a rejected one.
Can I borrow against the business I'm buying?
Partly: lenders lend against its maintainable earnings and any hard assets, but goodwill-heavy businesses gear lower. That's why acquisition funding usually blends lender debt, your equity, and sometimes property security or vendor finance.
Do you handle the whole deal?
The finance, yes. And the group covers the rest: LINK Advisors on due diligence and structure, LINK Wealth on what the acquisition means for your personal position. One roof, whole deal.
Can I use my home equity to buy a business?
Yes, and it changes the deal: property security moves the lending from goodwill-secured (conservative, pricier) toward property-secured (higher gearing, sharper pricing). Many acquisitions blend both: an equity release funds your contribution, and the business loan funds the rest. The trade-off is your home standing behind the business, which deserves a clear-eyed conversation, and gets one.
What is vendor finance and should I want it?
The seller leaves part of the price in the deal, paid to them over time from the business's earnings. Lenders like seeing it (a seller confident enough to wait is a good sign), and it shrinks the equity you need. Terms matter: how long, what security the vendor holds, and what happens if trading dips. Your accountant and solicitor paper it properly.
How do lenders check the business is worth the price?
Through maintainable earnings and the multiple. They test the add-backs against evidence, compare the multiple to industry norms, and often lend against their own assessed value rather than the contract price. If those numbers land under your deal, the gap is yours to fund, which is why we pressure-test the valuation before you go unconditional.
How long does acquisition finance take?
Credit approval commonly takes two to four weeks once the file is complete; the whole journey from agreed deal to settlement usually runs one to two months. Lease assignments, franchisor approvals and licence transfers are the usual delays, not the bank. Start the finance conversation before you sign anything and the timeline behaves.
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