Service
Goodwill Finance
When most of the purchase price sits in goodwill rather than hard assets, the first bank often says no. The deal is rarely dead. It needs the right lender and the right structure, and that is what we build.
Financing the part of the deal a bank can't repossess
In most business sales, the largest part of the price is goodwill. It is the value of the business as a going concern, the customers, the recurring revenue, the contracts, the reputation, and the brand, sitting above the value of the stock, equipment and fit-out. Goodwill is real value. It is also the part lenders are most cautious about, because there is nothing physical to recover if the loan goes wrong.
That caution is why a buyer with a profitable business under offer can still hear no from their own bank. The business is sound, the price is fair, but most of the value is goodwill and the bank caps how much goodwill it will lend against. The deal looks finished. In practice it usually is not. It needs a lender whose appetite matches the deal, a security position structured properly, and often a working capital line built in for the transition.
We are based in Perth and work with buyers across Australia on exactly this problem. We know which lenders support goodwill, how far each will go by industry, and how to build a structure that gets the deal across the line.
Where goodwill finance applies
- Professional practice purchases, medical, dental, legal, accounting and allied health
- Established franchise acquisitions with a proven model
- Service businesses with recurring revenue and a transferable client base
- Childcare, pharmacy and other licensed or accredited businesses
- Owner-operator businesses where the price sits well above the asset value
- Partner and management buyouts where goodwill dominates the valuation
How lenders look at goodwill
The question a lender is really asking is whether the earnings that justify the goodwill will survive the change of ownership. A practice with systems, staff and recurring patients or clients is very different from a business whose revenue walks out the door with the departing owner. The more transferable and predictable the income, the more goodwill a lender will support.
Most banks set an internal cap on goodwill exposure, and the cap moves by industry. Where the deal sits above that cap, the gap is closed in one or more of a few ways, a larger deposit, additional security across residential or commercial property, vendor finance left in by the seller, or a specialist lender with more appetite for the sector. Knowing which of these a deal needs, before you make an offer, is the difference between a clean approval and a stalled one.
How we structure it
We start with the earnings and the price, work out how much of the goodwill a lender will realistically fund, and then build the rest of the structure around that number. That might mean matching the deal to a lender who understands the sector, setting up the security so the goodwill exposure sits within policy, or designing vendor finance in from the start rather than bolting it on later. Where the transition will create a short-term cash flow gap, we size a working capital line to cover it.
Goodwill finance is rarely a standalone product. It is usually one part of a wider acquisition finance structure, and it needs to be designed alongside the deposit, the security and the working capital, not in isolation.
Test the goodwill before you make an offer
The cheapest time to find a goodwill problem is before you sign. Bring us the financials and the asking price and we will tell you honestly how much of the goodwill is fundable, what the gap is, and how we would close it. You can also map the likely shape of the deal yourself with our business acquisition calculator, which separates the tangible assets from the goodwill so you can see where the funding pressure sits.
Frequently asked questions
Can you get finance for goodwill?
Yes. Goodwill can be financed, but lenders treat it differently from tangible assets because there is nothing to repossess if the loan fails. Most banks cap how much goodwill they will lend against, and the cap moves with the industry and the strength of the earnings. A medical, dental, accounting or established franchise business with predictable, transferable income usually attracts stronger goodwill lending than a retail or hospitality business priced largely on reputation. The amount financeable depends on what the business earns relative to what it is being sold for.
What is goodwill in a business sale?
Goodwill is the part of a purchase price that sits above the value of the tangible assets, the stock, equipment, fit-out and vehicles. It represents the value of the business as a going concern, including its customer base, reputation, recurring revenue, contracts and brand. In many small and medium business sales, goodwill is the largest single component of the price.
How much will a bank lend against goodwill?
There is no single figure. Lenders set internal limits on goodwill exposure that vary by industry, by the quality of the earnings, and by the security on offer. A practice or franchise with strong, transferable cash flow can support more goodwill lending than a business whose value depends heavily on the current owner. Where a bank will not fund the full goodwill component, the gap is usually closed with a larger deposit, additional security, vendor finance, or a specialist lender.
Why won't my bank lend against goodwill?
Goodwill cannot be charged or sold the way a property or a piece of equipment can, so from a lender's point of view it carries more risk. That does not make the deal unfundable. It usually means the structure needs work, the right lender needs to be matched to the deal, and the security position needs to be set up so the goodwill exposure sits within what the lender will support. That is the work we do before an application is lodged.