Why partner buyouts need to happen quickly
Partnerships end for all sorts of reasons. One partner wants to retire. Another wants to move interstate or start something new. Sometimes the two of you simply see the future of the business differently. Whatever the reason, once the decision is made, the business is in limbo until the buyout is done. Staff sense it, customers notice, and decisions stall because nobody is sure who has the final say.
A drawn-out buyout also leaves room for the deal to change. The departing partner may revisit the price, other parties may get involved, or relationships may sour. Agreeing a price and paying it promptly protects the business and, often, the friendship.
Why a bank buyout loan is hard to get in time
Banks treat a buyout like a new acquisition. They want financials, often for several years, a credit check on the continuing owner, a valuation and sometimes a business plan. Approval can take up to three months or more, and the bank may lend less than the agreed price. The departing partner may also be a guarantor on existing bank facilities, which adds another layer of paperwork and delay.
Equity Tap is a direct, independent private business lender that lends its own money from $50k to $5m for one to twelve months. Our loans are secured by a first mortgage, second mortgage or caveat over residential or commercial property anywhere in Australia. We don't order a valuation before approval, and we don't need tax returns, BAS, profit and loss, an accountant's letter or bank statements for a property-secured loan.
Ways to structure a partner buyout
| Structure | How it works | Typical exit |
|---|---|---|
| Full buyout from your own property | Second mortgage over your home pays the partner in full | Bank refinance once you are sole owner |
| Buyout secured by business premises | Loan against the commercial property the business owns or occupies | Commercial refinance or sale of surplus property |
| Bridge to a bank buyout loan | We fund now, the bank refinances when its approval completes | Bank settlement |
| Buyout plus working capital | Loan covers the partner payment and a cash buffer | Refinance or business cash flow |
Leave your existing home loan alone
Most continuing owners already have a home loan they are happy with. A second mortgage sits behind it, so you don't need to refinance the whole thing to raise the buyout money (the first lender's consent may be needed). If the business owns its premises, a loan against that commercial property may suit better. Use the equity calculator for a quick guide to available equity.
Breathing room after the buyout
Taking over full ownership often means taking on more work and responsibility in the first few months. Interest for up to the first six months can be prepaid or added to the loan, so there are no scheduled payments while you reset the business around one owner. Interest is not waived, but it isn't coming out of cash flow during the transition.
The exit
We only lend with an exit we both believe in, and we agree it before funding. For partner buyouts, the most common exits are:
- A bank refinance once the business is in your sole name and the old facilities are restructured.
- Selling a property, such as an investment or a surplus site.
- Selling equipment or a division the continuing owner doesn't need.
- Trading cash flow where the buyout is small relative to profits.
Our exit strategy guide sets out how to plan it.
For example
For example, two partners have run an electrical contracting business for fifteen years. One wants to retire and they agree on a price. The continuing partner has strong equity in his home but the bank wants a full review of the business and won't commit to a date. A short-term loan on a second mortgage pays the retiring partner on the agreed day, and the continuing owner refinances to a bank once the business has a year of trading under sole ownership.
What we need
- ID for the borrowers and any guarantors.
- Property address and existing mortgage details.
- The buyout agreement or heads of agreement showing the price.
- Evidence of the exit.
No credit check at initial assessment, and a past decline is not automatically a problem.
How quickly it can happen
Call 1300 123 024. The person who answers is often the person who makes the decision; there is no credit committee. Conditional approval can often be given on the phone, with a term sheet in about 30 minutes once we have the scenario. Eligible loans can settle in as little as 24 hours.
If you're buying an outside business rather than a partner's share, see buying a business. If the buyout is part of settling a family estate or separation, see estate and family settlement funding.
Brokers
Send buyout scenarios via our broker page for a fast indicative answer. You keep the client and the long-term refinance.
Take full ownership
Each loan is priced on the client's individual circumstances, aiming for the sharpest rate available for that situation, with the full cost shown before you proceed. Apply online or call 1300 123 024.
Business-purpose lending only. Approval, timing and terms depend on the scenario.
Frequently asked questions
Can I get a loan to buy out my business partner?
Do you need the business financials?
Can I use my home as security without refinancing?
How quickly can my partner be paid?
What if my bank is still working on a buyout loan?
How long can I have the loan?
Do I need a valuation?
Brokers: send the scenario through the Equity Tap broker channel and you will deal with the same lending team.