Can I Use Property Equity if the Bank Won't Fund Enough of a Business Acquisition?

Quick answer: Potentially. If a bank will not fund enough of a business acquisition, property equity may support a separate business-purpose facility or a different overall structure. The buyer still needs to model total leverage, acquisition cash flow, working capital after settlement and a realistic exit.

Property-security filter: This page is about business-purpose finance backed by Australian real property. If there is no suitable property available as security, this particular funding pathway will generally not apply.

Questions behind this page

• Can I use home equity to buy the business?
• Can I preserve cash for working capital and use property security for more of the purchase?

The acquisition gap is usually bigger than the purchase-price gap

Stock, legal costs, settlement adjustments and opening working capital can all increase the total funding need.

Property can change the capital structure

Residential or investment property security may support more debt than the acquisition business can support on a stand-alone basis.

Preserve enough liquidity

Using every dollar of borrower cash for settlement can leave the newly acquired business underfunded. The property-backed structure should be assessed together with the first 90 days of working capital.

What GPS Finance needs to test a scenario

• Australian property offered as security
• estimated property value and current secured debt
• amount required and business purpose
• whether the proposed facility is first or second ranking
• required timeframe
• proposed exit or repayment strategy

Ask GPS to review a property-backed business scenario.

Related guides

• Property-backed business finance
• Second mortgage business finance
• Bank funding shortfall
• Short-term property-backed finance
• Acquisition working capital
• Deposit to buy a business

Sources and verification

• PropertyChat — acquisition funding with residential security
• Reddit — buying a business and property equity

General information only. Business-purpose property-backed lending, private lending, first and second mortgage availability, valuation, pricing, fees, security priority, consent requirements and exit criteria vary by lender and transaction. This is not legal, tax, accounting or personal financial advice.