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Using a Loan to Buy a Business

by OnDeck Australia,   Feb 23, 2023

For many, the idea of borrowing money to finance a purchase can be daunting. Especially when that purchase is a big investment like a small business. But with the right approach, it’s the best way to get a running start with your newly purchased company. In this post, we’ll share some tips on how to borrow to buy an existing business. We’ll cover the basics of what you need to know and how to get started. So if you’re considering buying a business, read on!


Research the business you want to buy – know what you’re getting into

If you are considering buying an existing business, research is key! While the excitement of the prospect of owning this new venture can cloud your judgement, it is important to ensure you know exactly what you are getting into. Make sure to read about the company’s history and any legal issues it may have faced, investigate its financials and cash flow, and look for industry trends that may affect the future of the business. Research the company’s intangible assets; do they have an established brand and customer base? Always ask yourself “if the business is going as well as the current owner makes out, why are they selling?”

This will provide valuable intel allowing you to make an informed decision when it comes time to purchase. With the right knowledge under your belt, you’ll be able to confidently launch your next business!

As part of this research, you’ll want to get in touch with the business owner, or their adviser, business broker, lawyer, or accountant put in charge of selling a business, to register your interest and ask questions about the business.


Choose a lender that specialises in business purchase loans – they’ll be able to give you the best rates

When you’re taking over a business, finding the right lender to borrow money from is essential. Choose a lender that specialises in business loans. They’ll have knowledgeable staff and be able to give you competitive rates that are tailored to your individual needs. With specialised lenders, any questions you may have regarding fees, charges or repayment policies can be answered quickly and easily. When it comes to choosing a lender for your business loan, choose specialists for an efficient and cost-effective loan experience.

While secured loans can have lower interest rates, it is important to consider whether you have or want to put up your home to secure the loan. Unsecured loans can be an alternative, so that you don’t risk losing personal or business assets if something goes wrong.

While OnDeck doesn’t provide loans to purchase a new business, once it meets the eligibility requirements our loans can help push your business plan to the next level and promote success.

An unsecured business loan from OnDeck can provide up to $250,000 across terms ranging between 6 and 24 months. The unsecured loan application process can be completed in minutes with a decision in as fast as 30 minutes, using just 6 months of recent business bank statements.

Learn more about OnDeck business loans

Secured vs Unsecured Loans

Whether a secured business loan or an unsecured loan is right for you is heavily dependent on the state of the purchased business, your current assets, and your ability to repay the business purchase loan. Some small business owners are forced to go with a secured loan but regret it when the assets used as collateral become at risk. Other financial institutions only offer one type, for instance, OnDeck only does unsecured business loans.


Create a budget for your new business

Include all expected costs, such as inventory, rent, and employee salaries

Creating a budget for an existing business can be daunting but setting up a financial plan to ensure your success is essential. You will need to consider all expected expenses, starting with inventory, rent, equipment financing, and employee salaries. To ensure every crucial cost has been accounted for, make sure to research thoroughly and create a realistic budget that you can adjust down the line when market insights change. It’s also important to not forget the less obvious costs of business acquisition, such as insurance and logistics fees. Once you have set your budget, stick with it! Having a concrete baseline from which to assess performance and track future investments will offer invaluable insights into the growth of your business.

Have a solid plan for how you’re going to make money – this will help convince lenders to give you the loan

Making a solid business plan on how you plan to make money is the best way to convince lenders that you are capable of repaying what you borrow from them. Before turning to lenders, consider your options and assess your current finances. Set up a step-by-step process for when, where and how much money you’ll need in order to build a successful business. Research the various avenues of making money available to you, such as investments and loan products that meet your needs and goals. When it comes time to present your plan and request funds from lenders, be prepared with a portfolio of facts and figures that demonstrate your ability to repay any loans they provide you with. With thoughtful consideration and preparation of your financial future, lenders will have the confidence needed in order to approve the loan.


Consider a small unsecured business loan to cover operating costs

A lack of money to keep existing businesses going during a change in ownership is a common cause of failure. The extra resources spent on refining processes and hiring extra add up. It can be worth taking out a small business loan to ensure continued cash flow in the period after you buy a business. As you explore the costs of purchasing a business, keep available finance options in mind.


What now?

Congratulations on taking the next step in becoming a business owner! Research and preparation are key to making your dream a reality, and we hope these tips have set you on the right path. Good luck as you continue taking steps towards owning your own business – we know you’ll be great!

When you’re ready, having been trading for more than 12 months and generating $100,000 in revenue, contact us about our unsecured business loans.


Prepared by OnDeck Capital Australia Pty Ltd ABN 28 603 753 215 (“OnDeck”) for general information purposes only. Content may belong to or have originated from third parties and OnDeck takes no responsibility for the accuracy, validity, reliability or completeness of any information. Information current as at February 2023. You should not rely upon the material or information as a basis for making any business, financial or any other decisions. Loans issued in Australia are subject to the terms of a loan agreement issued by OnDeck. Loans are subject to lender approval. OnDeck® is a Registered Trademark. All rights reserved.

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