Most buyers walk into an acquisition thinking the business is the product being assessed. In practice, the lender is assessing both, the business and the person buying it.  

Getting one side right without the other is one of the most common reasons deals in business acquisitions across Australia stall or collapse entirely. 

This article breaks down exactly what banks assess when someone apply for business acquisition finance in Australia, what raises flags and what gives a deal real momentum. This comes from direct experience working across complex commercial lending scenarios in the Australian market. 

Why Business Ownership May Beat Property as a Wealth Strategy 

Property still dominates the conversation in Australia when business owners think about wealth-building. That’s understandable. It’s familiar, and the cycle even when slow, tends to eventually reward patience. 

But there’s a meaningful difference in the nature of that return. Property grows on market cycles largely outside the owner’s control. A well-acquired business grows in proportion to the skill and intent behind it. That’s a different risk profile and for many operators, a far more interesting one. 

“Business gives you control. And as long as you’re operating within your sphere of competence, you can take revenues from point A to point B. The growth of the business really depends on our skills. That’s the difference.“ 

— Sidd Bahree, Founder, Xpress Finance 

A 2025 PricewaterhouseCoopers report found that AI-exposed businesses are seeing productivity gains nearly four times higher than non-AI-heavy sectors with revenue per employee rising sharply. That matters for acquisition valuations. A business with the right foundation, with technology layered on top by a capable owner, can scale faster than any passive asset. The ceiling is different. 

None of these makes acquisition easy. But it does make it worth understanding properly — starting with how funding actually works. 

The First Thing a Lender Will Ask You (That Most Buyers Don’t Expect) 

Before any lender examines the target business, they examine the buyer. 

Specifically, they want to understand management experience and that assessment goes deeper than most applicants expect. 

There’s a psychological principle at work here. Lenders are not simply processing numbers; they are forming a mental model of what happens after settlement. Who is running this? Do they actually know what they’re walking into? That judgment shapes everything that follows in the credit assessment. 

A senior corporate manager with fifteen years of experience in a large company is, in some ways, a riskier acquisition candidate than a trade operator buying out a competitor. The corporate background brings discipline and structure. What it often doesn’t bring is the ability to manage rostering, stock, supplier disputes, compliance obligations and sales simultaneously, with no department to delegate to.  

“The first thing banks will look for is your management experience. Your sphere of competence — that’s non-negotiable. You need to demonstrate you know how to run what you’re buying.” 

— Sidd Bahree, Xpress Finance 

In most cases, the question isn’t whether experience exists. It’s whether the experience is relevant to what’s being bought. When it’s not, the application needs to address that gap directly: retained management, a structured handover period or a clearly articulated plan for how the operational knowledge transfers. 

What Banks Are Actually Assessing in a Business Acquisition Deal 

Once the buyer passes the management lens, attention shifts to the target business. Lenders are building a picture of durability not just current performance. 

1. Revenue Stability and Predictability 

Banks don’t just want to see strong revenue — they want to see stable revenue. A business generating consistent income from recurring contracts or long-term client relationships is a very different proposition to one that relies heavily on foot traffic, seasonal demand, or a small handful of large clients. 

The core question your lender is asking is: why do we believe this revenue will still exist in two, three, or four years? If the honest answer is “because the current owner built great relationships,” that’s a problem — because those relationships may leave with them. If the answer is “because there are signed contracts, a known brand, and a diversified client base,” that’s a fundable story. 

2. Key Person Risk 

This is one of the most common deal-breakers in business acquisitions, and one of the most underestimated risks by buyers. If the business’s revenue, reputation, or core relationships are heavily dependent on the current owner, a bank will be deeply cautious because once that person walks out the door, the asset you’ve just paid for may look very different. 

The questions to ask before presenting to a lender: Is there a management team in place? Are key client relationships documented and transferable? Are systems and processes written down, or do they live in someone’s head? Is the outgoing owner available for a structured handover period? 

3. Brand Strength and Market Position 

A business with genuine brand equity, a recognisable name, strong reviews, a loyal customer base, a defensible niche commands a different valuation multiple and a different lender response than a commodity operation in a crowded market. Banks are looking for evidence that the business has a durable competitive advantage, not just a good recent trading period.] 

4. EBITDA and the Valuation Multiple 

EBITDA – earnings before interest, taxes, depreciation and amortisation — is the most commonly used measure of a business’s underlying profitability. It’s the figure that drives valuation, and it’s the figure lenders will stress-test thoroughly. 

Most SME business acquisitions in Australia trade at two to five times EBITDA. The multiple shifts based on growth trajectory, client concentration, industry defensibility and whether the business is founder-dependent. 

5. Compliance and Operational Risk 

Banks will also assess whether the business has any outstanding regulatory issues, pending legal matters, lease obligations, or compliance gaps that could create liability for a new owner. This is where a thorough due diligence process ideally with an accountant and lawyer who work together rather than in silos, becomes critical. 

The Revenue Drop That Almost Every Buyer Ignores 

Here’s something seen consistently across business acquisitions in Australia: when a new owner takes over, revenue almost always drops. At least temporarily. Some clients had personal loyalty to the previous owner. Others take a wait-and-see approach. A few simply leave. 

This is not failure. It’s a predictable adjustment. The problem is that most buyers build forecasts around the best case and present that to the lender, the accountant and themselves. The bank adjusts by five to ten percent. In practice, planning fifteen to twenty percent is more honest and more useful. 

“Anytime a new owner steps into a business, there will be some adjustment on sales. Existing clients may not immediately warm to you. There will be a drop-off. We see that very often.” 

— Sidd Bahree, Xpress Finance 

The planning question worth asking before any acquisition: if revenue falls by twenty percent for the first six months, can wages, rent, supplier costs and loan repayments still be met? If the answer is uncertain, the acquisition structure, not just the forecast needs revisiting. 

Prefer to hear it directly? Sidd Bahree joined Paul Sweeney on The Business Behind Your Business to go deeper on everything covered above including case studies and what to do before approaching a lender.

Full episode below.

What to Do Before Looking at a Single Business 

Getting acquisition ready means being positioned before an opportunity arrives, not scrambling for approvals after one does. In practice, that means: 

Practical Steps to Take Before You Start Looking 

• Get a preliminary credit and serviceability assessment from a commercial finance broker 

• Prepare a two-to-three year summary of your own business financials (or employment and personal financial position) 

• Write a one-page management capability summary: your relevant experience, your industry knowledge, and how you plan to fill any gaps 

• Identify and brief your accountant and commercial lawyer now. Not when a deal is under time pressure 

• Clarify your budget range, your preferred industry or business type, and your non-negotiables in a target business 

• Begin building or documenting your own systems and processes if you’re planning to roll acquisitions into an existing business 

A Final Point Worth Sitting With

Business acquisitions in Australia are not a shortcut. Buying an existing business with proven revenue, trained staff and tested pricing does shorten the path to cash flow but only when the buyer is genuinely prepared for what running that business requires. 

The deals that work are the ones where management competence, financial planning and advisory support are all aligned before the search even begins. The ones that don’t work often aren’t missing capital. They’re missing preparation. 

Start the conversation early. Know your borrowing position. Build the team. Then find the business.