Non-Bank Lender Comparison Checklist for Business Acquisition (Australia)

Non-Bank Lender Comparison Checklist for Business Acquisition (Australia)

Use this checklist once per lender you're seriously evaluating. Run through it before signing anything — and before you let a lender rush you.

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Section 1: Lender Qualification — Is This Product Right for Your Deal?

Before comparing rates and terms, confirm the lender actually fits your deal type.

• Does this lender specifically write business acquisition loans (not just general business loans or equipment finance)?
• Has this lender funded deals with high goodwill content similar to yours?
• Can they confirm recent acquisitions they've financed in a comparable industry (trades, services, hospitality)?
• What is the lender's minimum and maximum loan size? Is your deal within their preferred range?
• Is this lender directly funded, or are they a broker placing you with a panel of funders? (If broker, who is the funder, and can you speak to them directly?)
• Is the lender licensed under an Australian Credit Licence (ACL)? Check ASIC Connect if unsure — any lender without an ACL for your loan type is a red flag.
• Does the lender have experience with the specific structure in your deal — e.g., an earn-out, vendor finance component, or management buy-in arrangement?

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Section 2: Cost — The All-In Number

The headline rate tells you almost nothing. The all-in cost tells you everything.

• What is the annual interest rate — fixed or variable?
• If variable: what is the reference rate (bank bill swap rate, RBA cash rate, lender-set rate) and how often can the lender move it?
• What is the establishment fee expressed as a percentage of the loan? (Standard range: 1-3%)
• Are there ongoing line fees or annual review fees? What are they?
• What is the break cost / prepayment penalty if you refinance early? Is it a flat fee, a percentage, or an interest make-whole calculation?
• Are there any brokerage fees separate from the lender's establishment fee? Who pays them — you or the lender?
• Calculate the total cost of the loan over the expected term (not just the first year). Use the formula: (interest rate × loan amount × years) + all fees. Compare this number across lenders, not just the rate.
• If the rate is variable: stress-test serviceability at a rate 2% higher. Can the business still service the debt comfortably?

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Section 3: Security — What Are You Putting on the Line?

This is the section most first-time buyers skim. Don't skim it.

• Is a personal guarantee required? (Almost always yes — see the guide to personal guarantees for what this means.)
• Does the lender require a mortgage or caveat over your residential property? If yes, what LVR and is it registered as a first or second mortgage?
• What assets will the lender register a PPSR charge over — just the business assets, or your personal assets as well?
• If the loan is secured against the business assets: what is the trigger for the lender to exercise their security? (Default events — see Section 5.)
• Is the vendor finance component (if any) subordinated to the senior lender's position? Has the senior lender confirmed this in writing?
• If multiple lenders are involved (bank + non-bank, or senior + mezzanine): have they agreed to a inter-creditor deed or deed of priority that clarifies each lender's security position?

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Section 4: Loan Terms and Flexibility

• What is the maximum loan term on offer? (Most non-bank acquisition loans: 3-5 years)
• What is the repayment structure — principal and interest from day one, or interest-only period available for the first 6-12 months?
• Is there a cash reserve requirement — i.e., must you maintain a minimum cash balance in the business account at all times?
• Can the loan be drawn down in tranches if the deal has deferred components, or must it be drawn in full at settlement?
• What happens if the deal falls over before settlement — are establishment fees refundable or non-refundable?
• Is there a refinancing pathway into bank debt once you have 12-24 months of trading history? (Ask explicitly — some lenders impose hurdles that make this difficult in practice.)
• Are there financial covenants attached to the loan — e.g., minimum EBITDA, minimum DSCR, restriction on drawings? What are the specific numbers, and what happens if you breach them?

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Section 5: Default Events — The Fine Print That Matters

Ask the lender to walk you through the full list of default events in their term sheet. Then check:

• Is there a material adverse change (MAC) clause? This allows the lender to call the loan if they determine the business has deteriorated — the definition matters significantly.
• What constitutes a financial covenant breach, and is there a cure period before it becomes an event of default? (A 30-day cure period is standard; no cure period is a red flag.)
• Does the loan default if key person leaves — either you or a named general manager? If yes, what is the trigger and the consequence?
• Is there a cross-default clause linking this loan to any other facility you have (e.g., a home loan with another lender)?
• What is the lender's stated process after a default event — do they work with you first, or do they immediately enforce against security?
• Are there reporting obligations — e.g., monthly management accounts, quarterly compliance certificates? What happens if you miss one?

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Section 6: The Lender Relationship

Terms matter, but so does the person on the other side of the phone when something goes wrong.

• Who is your relationship manager at the lender, and will they remain your contact for the life of the loan?
• Has the lender provided references from other business buyers they've funded? (Willing to provide = good sign; won't provide = ask why.)
• What is the lender's process for annual reviews — do they automatically renew, or do they re-underwrite the deal each year?
• If the business goes through a rough patch in year one (common in owner-transitions), what is the lender's stated policy on working with distressed borrowers?
• How long has the lender been operating in business acquisition finance specifically? A lender who entered this space in the last 12 months may not have the experience to navigate a difficult deal.

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Section 7: Comparison Summary

After running each lender through the checklist above, use this summary to compare side-by-side. List each lender and fill in:

• Lender name:
• Total loan cost over term (interest + all fees):
• Security required (property? PPSR? personal guarantee?):
• Key covenants:
• Break cost if refinancing at 24 months:
• Refinancing pathway confirmed in writing:
• Deal-specific experience (similar acquisitions funded):
• Red flags identified:
• Overall assessment (proceed / investigate further / eliminate):

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Red Flags Summary — Walk Away If You See These

• The lender cannot name comparable acquisitions they have funded
• No ACL registration on ASIC Connect
• Establishment fee over 3% with no room to negotiate
• No cure period on financial covenant breaches
• Mandatory charge over residential property for a loan under $500,000
• Variable rate tied to a lender-set benchmark (not an external market rate)
• Resistance to providing loan documents for your solicitor to review before commitment
• Pressure to commit before your due diligence is complete

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Related resources

For a full breakdown of financing structures for business acquisition, see the Financing Options Checklist and the Deal Structure Comparison Framework. For the bank equivalent of this checklist, use the Bank Lending Criteria Checklist.