Business acquisition funding gap? Look at the target’s debtor ledger first.

A client wants to buy another business, but there’s a problem. They don’t own property, or they’ve already tapped out the equity in the property they do own. Their existing business doesn’t have the trading history or borrowing capacity to support the acquisition on its own.

For many brokers, that’s where the conversation stalls. According to Ben Howell, National Business Development Manager at Octet, it’s where a different question should start.

“What does the debtor ledger of the business they’re buying look like?" he asks. "Part of the funding solution could already be sitting inside the business they’re looking to acquire.”

The constraint is well documented. In its October 2025 Bulletin, the Reserve Bank of Australia noted that small businesses have long identified the requirement to provide residential property or other physical assets as collateral as a key challenge in accessing finance. Unsecured credit has remained below 5% of SME credit in recent years, and new loans secured by residential property are on average four-and-a-half times the size of those that loans that are not secured by residential property.

For a buyer with no property to offer, that gap can decide whether a deal goes ahead.

Demand for acquisition finance is unlikely to ease either and possibly a substantial pipeline of businesses facing ownership transition. NAB Private Wealth research found 46% of small-business owners expect retirement to result in their business closing, being liquidated or being sold outside the family, while fewer than four in ten expect family to take over.

Ben’s example is deliberately simple. A client wants to acquire a business for $3 million. The target has $2 million in eligible outstanding invoices owed by good-quality customers. That’s work already completed and revenue already earned, but the cash hasn’t arrived yet.

With debtor finance (also known as invoice finance or receivables finance), it may be possible to unlock a significant percentage of those eligible invoices following completion. An OctetDebtor finance facility advances up to 85% of invoice value, so a $2 million eligible ledger could represent up to $1.7 million in availability.

Ben is careful about what that means. “I’m not saying debtor finance simply pays $1.7 million of the purchase price. The transaction needs to be assessed and structured correctly. But suddenly that debtor ledger becomes an asset that could form an important part of your overall acquisition funding structure.”

The transaction structure matters. In a share sale, the debtor ledger generally remains within the company being acquired. In an asset sale, the sale agreement determines whether receivables transfer to the purchaser. The treatment of working capital, existing finance and security therefore needs to be understood before attributing funding availability to the ledger.

Octet’s debtor and invoice finance doesn’t require property security, which matters for buyers whose equity is already committed or who have none to offer.

"Your client hasn’t just purchased a business, they’ve purchased its operating costs as well,” Ben says. "Payroll, suppliers, rent, super and tax all continue from day one, alongside the cost of supporting and growing the business."

Funding the purchase price is one question. Having enough working capital left to run the business is another.

Customer payment behaviour can widen that working-capital gap. The Payment Times Reporting Regulator’s August 2026 update found average common payment terms of 29 days, yet it took reporting entities an average of 55 days to pay 95% of small-business invoices. Only 68.5% of payments were made within agreed terms. While payment performance has improved, the data shows that receivables can still remain outstanding well beyond standard terms.

This is where debtor finance can do two jobs. It can form part of the acquisition strategy, then continue as an ongoing working capital facility once the business is trading under new ownership. Because availability is tied to the eligible ledger, funding can potentially grow as the ledger grows.

Purchase price, equity, security and financials remain the starting point. Ben’s suggestion is to add a second set of questions about what sits inside the target business:

• How large is the debtor ledger?
• Who are the customers?
• How quickly do they pay?
• How concentrated is the ledger?
• How much of it could be eligible for funding?
• How is the debtor ledger being treated under the sale agreement?
• Is there existing security over the receivables that needs to be refinanced or released at settlement?

“The answers could completely change the way you approach the acquisition,” Ben says.

For brokers, the discipline is to look past the buyer’s balance sheet before telling a client to find more equity or wait another 12 months. Sometimes part of the funding solution is already sitting inside the business they want to buy.

Have a client considering a business acquisition? Before assuming more property equity is required, talk to Octet about the target’s debtor ledger and broader working-capital position. We can assess whether eligible receivables could support an OctetDebtor facility as part of the overall funding structure.