Does anyone have experience in securing debt for acquisitions in Australia?

searcher profile

September 20, 2020

by a searcher from Swinburne University of Technology in Melbourne VIC, Australia

I am at the early stages of a self funded search in Australia. Deal flow hasn't proven to be an issue however once I have landed on a target I will require somewhere between###-###-#### % debt financing to close the deal.

The challenge I am having is any banks & second tier lenders I have spoken with don't appear to have an appetite for true SME acquisition financing outside of small working capital loans.

In particular the requirement seems to be to use residential property to secure any debt (effectively only interested in mortgage lending) or strict personal guarantees.

Does anyone have any advice?

1
12
104
Replies
12
commentor profile
Reply by a searcher
from The University of Adelaide in Adelaide SA, Australia
Ed, some individuals and family offices have an appetite to cash flow lend in Australia, typically those that still have an operating mentality and industry experience relevant to your target will be attracted. Private credit funds such as Longreach, Causeway and challenger banks such as Judo are also started to get more active in LMM. Our banks have also seen their deposits increase substantially due to Covid and Job Keeper - they need to put these deposits to work and that seems to have generated some thawing of appetites to lend into the SME sector.
commentor profile
Reply by a professional
from University of Limerick in Perth WA, Australia
Hi Ed - agree with Miguel's comments above. As a "rule of thumb", major banks tend to lend on company purchases on a 50%:50% split between debt and equity. There are alternatives to banks, namely private credit funds who have a greater risk appetite but at a greater interest cost and they generally tend to look at debt sizing of $5M+ Every opportunity is different (namely a different credit risk profile) so it definitely worth understanding how much you can borrow before making a formal offer. Hope this assists. Regards, Paul
commentor profile
+10 more replies.
Join the discussion