Can the business being acquired be the security?

Not on its own. Private lenders secure against real property with a registered mortgage. If the target owns property, that property can be security once the acquisition settles, but the facility needs real estate security from day one.

Can I use a second mortgage to buy out a partner?

Yes, if the entity owns property with equity and the first mortgagee consents. The funds are paid to the exiting partner at settlement against the share transfer or the amended shareholders' agreement.

How long does acquisition finance take?

A clean file settles in 5–10 business days from the term sheet. The acquisition documents need to be substantially agreed before indicative terms can be firmed up.

Will the bank refinance it later?

That is the usual exit, once the combined business has a trading history the bank can underwrite. We structure the term with that timeline in mind and can introduce the refinance when the time comes.

Solutions

Business acquisition and partner buyout finance secured by property

Banks fund acquisitions slowly and conservatively, because the thing being bought has no track record in your hands yet. Property the acquiring entity already owns does. A first or second mortgage over it funds the purchase price or the buyout, with the bank refinancing once the combined business has a trading history.

Situations we see

Buying a competitor or a customer book where the vendor wants to settle on a timeline the bank cannot meet.
Buying out a partner or shareholder — a retirement, a dispute, a divorce on the other side of the cap table — where the price is agreed and the remaining owners need to fund it.
A franchise or additional site where the franchisor's deadline is fixed.
Acquiring the freehold the business trades from, from a landlord who has decided to sell.

How it is structured

The borrower is the acquiring entity or a related company that owns real property. Security is a first or second mortgage over that property — the business being bought is not the security, and goodwill is not valued. LVRs run to around 75% gross. The term is matched to the time the bank needs to see the combined business trading, usually 6–18 months, with interest capitalised or serviced as the entity prefers.

Where the buyout is within a trust structure, the borrowing entity is usually the corporate trustee. Our article on Pty Ltd versus corporate trustee borrowers explains what lenders look for in the deed.

What the funder needs

The sale agreement, share sale agreement or shareholders' agreement setting out the price and timing.
The security property, its encumbrances and a realistic value.
A short note on the exit — usually a bank refinance once trading results are available.
Confirmation that the funds go to the vendor or the exiting shareholder, not to a director personally.

We arrange the finance; we do not advise on the structure of the acquisition or its tax consequences. Your accountant and solicitor should be in the room for those.

The products behind it

Second Mortgage Loans

Sit behind a major-bank or other priority lender. Raise capital without disturbing an existing first.

First Mortgage Loans

Registered first mortgage over residential investment, commercial, industrial, rural or mixed-use property.

Can the business being acquired be the security?: Not on its own. Private lenders secure against real property with a registered mortgage. If the target owns property, that property can be security once the acquisition settles, but the facility needs real estate security from day one.
Can I use a second mortgage to buy out a partner?: Yes, if the entity owns property with equity and the first mortgagee consents. The funds are paid to the exiting partner at settlement against the share transfer or the amended shareholders' agreement.
How long does acquisition finance take?: A clean file settles in 5–10 business days from the term sheet. The acquisition documents need to be substantially agreed before indicative terms can be firmed up.
Will the bank refinance it later?: That is the usual exit, once the combined business has a trading history the bank can underwrite. We structure the term with that timeline in mind and can introduce the refinance when the time comes.

Related reading

Important — Business Purpose Lending Only

IMPORTANT — BUSINESS PURPOSE LENDING ONLY. Andorra Capital Solutions Pty Ltd (ACN 675 464 623 / ABN 32 675 464 623) is a commercial finance broker and introducer. We arrange property-secured business-purpose loans between Australian corporate borrowers and a panel of non-bank lenders and private investors. We do not provide credit ourselves. We do not arrange consumer credit and we do not arrange credit regulated by the National Consumer Credit Protection Act 2009 (Cth) (NCCP Act) or the National Credit Code. We are not an Australian Credit Licensee. Every loan arranged through us is either to a borrower that is not a natural person (outside the National Credit Code under section 5(1)) or for purposes that are wholly or predominantly business or investment purposes (outside under section 6(1)), or both. All borrowers are required to execute a Business Purpose Declaration and to evidence the true business purpose of the funds. No part of any loan arranged through us may be applied for personal, domestic or household purposes. If a borrower applies any part of the funds for a purpose to which the NCCP Act would apply, the borrower does so in breach of the loan agreement and indemnifies the lender against any resulting loss, claim or cost. The information on this website is general in nature, does not constitute financial, legal or taxation advice, and does not take into account your objectives, financial situation or needs. No interest rates, fees or other commercial terms are advertised on this website; pricing is determined by the relevant panel lender or private investor and is disclosed to the borrower as part of indicative terms. All loans are subject to credit assessment, satisfactory security, valuation, and execution of formal loan documentation by the relevant lender. For consumer credit (regulated under the NCCP Act), contact a licensed credit provider.

Deal on the table and the bank is still thinking?

Enquire about acquisition finance or call 0480 521 605