How to prepare your business for sale (and why the buyer's lender is your real audience)

Selling a business is one of the few moments when an owner sees their working life summed up in a single number. It is also a moment when many sales quietly fall over, and the reason is rarely the price. More often a buyer’s lender looks at the paperwork, can’t make sense of it, and the deal stalls or shrinks.

That is the angle this guide takes. Almost every buyer of a small or medium business borrows part of the price, from a bank, a non-bank lender or sometimes from you. So the best preparation is to build a business, and a file, that a lender can read in an afternoon.

Who is actually reading your business when you sell?

Three audiences look at your business during a sale, and they want different things.

Reader	What they want to see	What puts them off
The buyer	Reliable profit, a transferable customer base, a clear reason you are leaving	Owner-dependence, surprises in due diligence
The buyer’s lender	Two to three years of lodged financials, consistent bank statements, security and serviceability	Messy books, undisclosed debts, unexplained cash
The buyer’s accountant or lawyer	Clean lease, contracts that assign, employee entitlements accounted for	Verbal arrangements, missing paperwork

Lenders carry the most weight, because a buyer who can’t get finance can’t close. If you know how lenders assess a business, you can prepare for them directly. Our guide on how business loan assessment works shows the same lens from the borrower’s side.

What should I fix in the 12 to 24 months before listing?

Get the books into a state a stranger can read

Reconcile accounts monthly, lodge every BAS and tax return on time, and make sure your profit and loss statement matches what your bank statements show. When revenue in the accounts and deposits in the bank disagree, a lender assumes the worst. Our notes on keeping clean business records are a good checklist for the bookkeeping side.

Separate business from personal

Personal expenses run through the business make profit look lower and force awkward conversations. Move them out now. If you have been running the household’s fuel, phone and holidays through the company, a full year of clean separation makes the adjusted profit figure much easier to defend.

Reduce dependence on you

A buyer pays for a business that keeps working after the owner leaves. Write down procedures, introduce a second contact to your top customers, and document supplier terms. A business where one person holds every relationship is valued as a job, not an asset.

Check the lease

If you lease premises, the remaining term and options matter enormously. A café with eight months left on its lease and no option to renew is far harder to sell than the same café with a new five-year term. Talk to your landlord early, and ask what consents are needed to assign the lease.

Deal with the ATO and other overdue items

Outstanding tax, super or payroll items are normally paid out at settlement, but they also colour how a buyer sees the business. If you are on a payment plan, understand its terms. Our guide to ATO payment plans covers how those arrangements work and what a lender will make of them.

How do I work out what the business is really worth?

Business.gov.au describes three common approaches: comparing your business with similar ones that have sold or are for sale, taking assets less liabilities (including intangibles such as goodwill), and using net profit to set a return-based value. None of them is a formal valuation, but they give you a realistic range before you meet a broker.

The practical centre of most small-business pricing is adjusted profit. Here is an illustration, not a real business:

Item	Amount
Net profit shown in the accounts	$140k
Add back: owner’s one-off legal bill	$12k
Add back: personal vehicle costs run through the business	$9k
Less: market wage for a manager to replace you	($85k)
Adjusted profit	$76k

At a multiple of three, a buyer’s starting point is around $228k plus stock. If the same owner had paid themselves a normal wage all along, the accounts would simply have shown it. The point is that the buyer and the buyer’s lender will do this arithmetic whether you do or not, and arriving with the schedule ready, with receipts behind each item, shortens the argument. Our guide to valuing a small business goes deeper, and the glossary entries for add-backs and goodwill explain the terms.

What happens to my existing debt and security at settlement?

Many owners are surprised by how much of the sale price is already spoken for. Before you list, list every facility and its security:

• Term loans, overdrafts and lines of credit, with payout figures and any exit fees.
• Equipment finance and leases, which may need the buyer to take over the contract or you to pay out.
• A general security agreement or other charge registered on the PPSR, which has to be discharged for the buyer to receive clean title to the assets.
• Mortgages or caveats over property, including any owned by the business or lodged against your home to secure business debt.
• Director guarantees, which do not disappear just because the business is sold. Ask each lender to confirm in writing when your guarantee is released.

Knowing the net figure after these payouts tells you whether you can afford to sell at a given price. It is better to learn that at month one than at the contract stage.

How does tax shape the sale?

The ATO’s small business capital gains tax concessions can significantly change what you keep, and the planning is a conversation for your accountant well before you list. In outline, there are four concessions: the 15-year exemption, a 50% active asset reduction, the retirement exemption (with a lifetime limit of $500,000) and a rollover that defers a gain when you buy a replacement asset. Each has conditions, such as the small business entity test or the $6m net asset value test, and an active asset test, and the 15-year exemption in particular depends on how long you have held the asset and on your age and retirement status.

A few practical points:

• The way the business is structured (sole trader, company, trust) affects how concessions apply, so decide how the sale is structured with an adviser rather than at contract stage.
• GST treatment of the sale, stock valuation and the allocation of price between goodwill, equipment and stock all matter.
• If you want to put proceeds into super under the retirement exemption, there are rules and timing.

We do not give tax advice, and the details move, so treat the ATO page in the sources as the starting point and your accountant as the decision-maker.

What can go wrong, and what fixes it?

Timing mismatch. You want to buy the next thing before this one settles. A short bridging facility secured on property can cover the gap, provided the sale is genuinely under contract and the exit is clear.

The buyer is short of finance. Lenders rarely fund the whole price of a business, and buyers can fall short on their own contribution. Offering vendor finance, where you carry part of the price and are repaid over time, can close a deal that would otherwise die. It does put some of your proceeds at risk, so ask for security and a realistic repayment schedule.

Due diligence uncovers something. The most expensive surprises are the ones you could have found yourself. Run your own mock review using the same questions a buyer would use, drawing on our guide to due diligence before buying a business.

You need money to get ready. Finishing a refit, clearing a tax balance or catching up on overdue creditors can lift the sale price by more than they cost. If you need short-term funding to do it, a quick enquiry will show what is available without touching your credit file.

A 12-month timeline you can copy

1. Months 12 to 10: Book an accountant meeting about structure and tax, ask for a payout figure on every facility, and start monthly reconciliations if you don’t already do them.
2. Months 9 to 7: Separate personal spending, document processes, and open lease talks with the landlord.
3. Months 6 to 4: Prepare the adjusted profit schedule with supporting records, and build a data room of contracts, licences, insurance, staff list and asset register.
4. Months 3 to 1: Choose a broker or sell privately, set the asking range, and brief your accountant and lawyer on likely buyers’ lenders’ questions.
5. Listing onwards: Respond quickly to buyer requests. Slow answers cost deals.

Preparing the sale, and what comes after it

Sale preparation often involves a funding question somewhere along the way: a tax balance to clear before listing, a gap between settlement and your next venture, or a buyer who is a little short. Those are exactly the situations we help owners work through.

Tell us what you’re planning and the date you are working to. The form takes about a minute, and asking doesn’t leave a mark on your credit file. We don’t pass your details to a stack of lenders; one of our team reads your situation and rings you with a straight view of what might fit. The more accurately you fill it in, including any ATO balance or existing security, the sooner the right option comes to the top.

Talk through my sale funding →