HOW TO SOURCE FINANCE TO BUY A BUSINESS
S
ourcing finance to buy a small or medium-sized business in Australia involves careful planning and consideration of various options. Here are some common ways to finance the purchase of a business in Australia:
PERSONAL SAVINGS
programs and grants that may be available to small businesses, though the specific names and eligibility criteria can vary by state and territory. Check with your local government agency for small business support.
BUSINESS GRANTS
Using your own savings is often the easiest and most straightforward way to finance a business purchase. It reduces the need for external debt and can demonstrate your commitment to the venture.
BANK LOANS You can approach traditional banks and financial institutions for business loans. Prepare a comprehensive business plan, financial statements, and a solid credit history to increase your chances of approval.
VENDOR FINANCING Some business owners may be willing to finance a portion of the purchase price. This can be advantageous as it demonstrates their confidence in the business's potential success. Negotiate the terms, interest rates, and repayment schedule.
EQUITY INVESTMENT You can seek equity investment from venture capitalists, angel investors, or private equity firms. They may provide the necessary capital in exchange for a share of ownership in your business.
SMALL BUSINESS ADMINISTRATION (SBA) LOANS In Australia, there are government
Explore potential government grants for small businesses. These grants may be offered at the federal, state, or local level. Eligibility requirements and the application process vary, so research what's available in your area.
CROWDFUNDING You can consider using crowdfunding platforms to raise capital for your business purchase. Websites like Kickstarter and Indiegogo may be suitable for certain types of businesses. Family and Friends: Don't overlook the possibility of borrowing from family or friends. Make sure to formalize the arrangement with a clear agreement and repayment terms to avoid personal conflicts.
ASSET-BASED FINANCING
provide loans. Be prepared to demonstrate your creditworthiness and business plan. Franchise Financing: If you're buying a franchise, the franchisor may offer financing options or connect you with preferred lenders with experience in franchise financing.
FINANCIAL ADVISERS Seek advice from financial professionals, such as accountants or financial advisers, who can help you explore various financing options and create a financial strategy. Remember that each financing option comes with its terms and conditions, and it's essential to carefully consider the costs and obligations associated with each choice. Additionally, conducting due diligence on the business you intend to purchase is crucial to ensure you're making a sound investment. Always consult with legal and financial professionals as needed to navigate the purchase process successfully.
If the business you are buying has valuable assets, you may use these assets as collateral for a loan. Asset-based lending includes options like equipment financing or accounts receivable financing.
PEER-TO-PEER LENDING Online peer-to-peer lending platforms can connect you with individual investors willing to
Author:
Vijay Reddy
Director | Snr Partner Winquote SME Finance P. 1300 971 308 M. 0419 493 805 E. vijay.reddy@winquote.com.au winquote.com.au
19
