Selling your business? Get funds before the sale settles.

The long wait between yes and settled

Selling a business is rarely quick, even after the buyer has said yes. There is due diligence, the buyer's finance, landlord consent to assign the lease, licence and franchise transfers, stocktakes and handover periods. A signed heads of agreement can take months to become money in the bank.

All the while, the business has to keep performing. A buyer who sees revenue dip or suppliers going unpaid can renegotiate the price or walk away. So sellers often find themselves needing cash at the worst possible time: to keep stock levels up, pay out a debt that must be cleared before completion, fund a personal next step, or keep the business looking exactly as good as it did on the day the offer was made.

Why your bank is the wrong place to ask

From a bank's point of view, a business that is being sold is a business that is ending. Lending against its future cash flow makes little sense to them, and the timeline does not help. A bank facility commonly takes up to three months or more to approve, which can be the whole period until completion. Banks also want years of financials and will check your credit, and a business mid-sale does not always tick every box.

Unsecured cash flow lenders may move quicker, but they lend against trading, they usually want daily or weekly repayments, and the amounts are often too small. Daily repayments are exactly what you do not want while trying to keep the books looking healthy for a buyer. See our comparison of cash flow loan alternatives for more on that.

A short-term loan that the sale repays

Equity Tap lends from $50k to $5m for one to twelve months, secured by a first mortgage, second mortgage or caveat over residential or commercial property anywhere in Australia. The security does not have to be the business premises. Many sellers use their home or an investment property, and a second mortgage means the existing first mortgage stays exactly where it is (the first lender's consent may be needed).

The exit is the sale of the business. When the deal completes, the proceeds repay the loan. If the sale includes freehold premises, those proceeds can repay us too. For a business sale with a clear completion date, interest for up to the first six months can be prepaid or added to the loan, which means no scheduled payments while you finish the sale. That keeps the business's bank account clean and its cash flow intact for the buyer's review.

Common reasons sellers borrow before completion

• Clearing an ATO debt or BAS arrears that the buyer wants resolved before completion
• Paying out equipment finance or a supplier account that must be discharged at handover
• Keeping stock at normal levels so the stocktake reflects a healthy business
• Funding a deposit on your next business or property before the sale proceeds arrive
• Paying out a partner whose exit date falls before the sale completes

If the tax side is the pressure point, read our guide to ATO tax debt business loans.

What the loan looks like, step by step

1. Tell us about the sale. The agreed price, the buyer, the expected completion date and any conditions still outstanding.
2. Tell us about the security. Which property, who owns it and what is owed on it.
3. Get an answer. Conditional approval can often be given on the phone, with a term sheet issued in about 30 minutes.
4. Sign and settle. We explain the full cost and the exit, then documents are signed. Eligible loans can settle in as little as 24 hours.
5. Complete the sale. The loan is repaid from the sale proceeds at completion, or from the fallback exit if timing changes.

What we look at, and what we do not

No credit check is made at initial assessment. A credit check may be made before funding, but defaults, ATO debt or a past decline are not automatically a problem.

Thinking about the downside

Business sales do fall over. A buyer's finance can fail, or due diligence can turn something up. We are an ethical lender, so before you proceed we make sure you understand the loan, the costs and what happens if the sale does not complete. A good plan has a second exit, such as refinancing the loan, selling a property, or business cash flow over the remaining term. Terms run up to twelve months, so there is room to set a sensible term with a buffer. Our guide to exit strategies covers how to think this through.

For example, a café owner who has accepted an offer with a 90-day completion might take a four-month loan secured by a second mortgage over the family home to clear supplier accounts and an ATO balance, so the business hands over clean and the loan is repaid at completion.

For brokers

A client selling a business often needs a short bridge, not a new long-term facility. Send the scenario through our broker page. You deal with the same people who make the decision and get a fast indicative answer.

Finish the sale on your terms

Do not let a cash squeeze in the last few months give the buyer a reason to renegotiate. Apply online or call 1300 123 024. If you are on the other side of the deal, see our guide to fast finance for buying a business, and if you have sold property rather than a business, see funding before a commercial property sale settles.

Business-purpose lending only. Approval, timing and terms depend on the scenario.

Frequently asked questions

Brokers: send the scenario through the Equity Tap broker channel and you will deal with the same lending team.