How to Secure a Business Loan to Buy an Existing Business

In this guide, we’ll break down your financing options, including debt and equity finance, unsecured business loans, and more, so you can move forward with confidence.

This article is worth reading if you’re looking to buy a business, need a loan, or are exploring the best source of funding for your situation. This guide walks you through the key considerations, types of business finance available, and how lenders like Moula can help you secure the funding you need.

Before you jump into applying for a business loan, make sure you understand the business you intend to purchase. Review its financial statements, past performance, and future potential. You’ll need a detailed business plan that outlines how you’ll operate the business and repay the loan.

Assess your own financial position too. Lenders will want to know whether you have the financial stability to manage repayments, especially if it’s your first venture. Understanding the amount you can borrow and the impact on your cash flow is key to making a smart decision.

There’s no one-size-fits-all approach when it comes to business finance. Your options include:

• Secured business loan: Backed by an asset such as property or equipment. Offers lower interest rates but puts your assets on the line as security
• Unsecured business loan: Offered without the need for collateral, these loans are based on the creditworthiness of an existing business.  If the cash flow of an existing business supports the purchase amount, Moula can offer unsecured business loans of up to $250,000, featuring a straightforward online application process
  
• Line of credit or overdraft: Good for flexibility, but not always enough for a complete business acquisition
• Equipment Finance: If the business includes significant equipment assets, equipment finance can be used to help fund these purchases, with the equipment itself serving as security
• Invoice Finance: This option may allow you to borrow against the business’s outstanding invoices, providing immediate cash flow to support the acquisition

Choosing the right loan depends on your financial situation, the type of business, and your long-term goals.

Equity finance involves selling a share of your business in return for capital. Instead of repaying a lender, you’re giving up some ownership and control. It’s often used when starting a new business or when cash flow is tight.

Debt finance, on the other hand, lets you retain full ownership but requires regular repayments. This includes traditional loans, invoice finance, and other forms of borrowing.

Both equity and debt finance come with pros and cons. For an established business purchase, many buyers opt for debt finance, allowing them to maintain full control of operations while spreading repayments over time.

Yes, unsecured business loans can be used to finance the purchase of a business. These loans are attractive because they don’t require you to pledge an asset, which is helpful if you don’t own property or want to protect your personal assets.

However, because they’re riskier for lenders, unsecured loans often come with a higher interest rate and lower loan amount caps. They’re best suited for buying smaller businesses or paying part of the sale as a top-up alongside other financing.

Unsecured business loans are widely offered by online lenders and fintechs, with fast approval processes and minimal paperwork compared to banks.

To get a business loan approved, most lenders will ask for the following:

• Business plan (including cash flow forecasts)
• Financial statements for the existing business
• Details of the business purchase agreement
• Your credit history
• Evidence of business experience
• Personal and/or business tax returns

Some financial providers may allow you to apply online and integrate your bank data directly to speed things up. Others, especially traditional business banks, may need face-to-face meetings and more detailed documentation.

Vendor finance is when the current business owner (the vendor) lends you a portion of the purchase price. You pay a deposit upfront, then repay the vendor over a specified period.

This is a useful option if you need money but don’t qualify for the full loan amount from a lender. It’s often used in combination with traditional financing options, helping you secure finance when you’re a bit short on capital.

Vendor finance agreements should always be clearly documented, outlining how and when repayments are made, what happens in case of default, and whether interest is charged.

If the business you’re buying comes with high-value equipment or physical assets, you might use asset finance or equipment finance to fund part of the deal.

Instead of taking out one large loan, you can finance individual assets separately. This frees up working capital for other aspects of the acquisition, such as stock, staffing, or marketing.

Asset finance is a secured loan, with the equipment acting as collateral. It’s commonly used in industries such as transportation, construction, and hospitality.

Lenders want to ensure that you can manage your cash flow and repay the loan. If the existing business has strong revenue, that’s a big tick. You’ll still need to demonstrate how you plan to maintain or improve business performance after the purchase.

A solid business plan that includes a cash flow forecast, marketing strategy, and operational goals will improve your chances. This is especially important for start-ups and small businesses where the lender can’t rely on a long financial history.

Demonstrating how finance can help you grow your business will make your application much more compelling.

Applying online is becoming the default for many small business owners. Online finance companies and lenders offer quick applications and same-day decisions. You’ll usually need to provide:

• Personal and business identification
• Business bank statements (for existing business)
• Details of the business you intend to purchase

Moula integrates directly with your accounting software or bank accounts, making it faster and easier to assess your financial position.

If you’re after speed and flexibility, applying online for an unsecured business loan or invoice finance product could be a good option. Make sure you compare interest rates and repayment terms before making any financial commitments.

Getting your finances sorted is just the start. Once the business is yours, the real work begins. Business finance can help cover working capital, restock inventory, or invest in a refresh to attract new customers.

You may also need capital to hire staff, improve systems, or expand your product offering. Having access to funding gives you the breathing room to make strategic decisions without having to scramble for cash.

Many new business owners underestimate how much capital they’ll need in the first six to twelve months. Having a funding solution in place enables you to stay competitive while building momentum.

• Understand the financial health and risks of the business you’re buying
• A strong business plan and good cash flow forecasts are essential
• Business loan options include secured, unsecured, term loans, and vendor finance
• Unsecured business loans are fast and flexible, but often more expensive
• Asset finance can help fund businesses that require equipment
• Vendor finance may be helpful if you don’t have enough upfront capital
• Online lenders offer fast access to funding. Moula can provide decisions within 24 hours, with funds disbursed shortly after approval
• Use business finance not just to buy, but also to grow the business

Whether you’re buying a café, a tradie business, or a digital agency, the right finance can make all the difference. Get the advice you need, weigh up the pros and cons, and choose a business lending solution that suits your business goals.

Learn more about small business loans from Moula. Also, check out Frequently Asked Questions on How to Get a Business Loan.

If you want to get an estimate of loan principal and interest repayments, use our Business Loan Calculator.