Seller finance defers part of the purchase price; it does not remove the debt or make the purchase self-funding. Compare realistic cash available after operating needs with repayments, then test lower revenue and any final balloon payment.
What seller finance means in this example
The buyer pays a deposit and owes the seller the balance under an agreed loan arrangement. Actual terms may involve security, guarantees, default provisions and other obligations. Have the agreement and tax consequences reviewed before committing.
Our calculation is a hypothetical fixed-rate loan with monthly payments in arrears. It excludes fees, daily interest, rate changes, refinancing and transaction taxes. It is a learning model, not a loan quote or valuation.
Work through the cash waterfall
| Annual item | Fictional amount |
|---|---|
| Revenue collected on the assumed steady-state basis | A$1,200,000 |
| Direct delivery costs at 65% | −A$780,000 |
| Fixed overheads | −A$180,000 |
| Replacement owner/manager wage, not already in costs | −A$90,000 |
| Combined tax, maintenance and working-capital reserve | −A$55,000 |
| Cash available before acquisition debt | A$95,000 |
For this example the reserve comprises A$30,000 estimated tax, A$10,000 maintenance/capital spending and A$15,000 extra working capital. These are assumptions, not tax calculations. Cash timing can still create a shortfall even when the annual total is positive.
Add the purchase debt
Purchase price A$450,000 less deposit A$150,000 leaves A$300,000 financed. At an illustrative nominal annual rate of 8%, over five years, with no balloon and monthly payments, repayment is approximately A$6,082.92 a month, or A$72,995 a year.
A$95,000 divided by A$72,995 is about 1.30 times debt cover. That leaves about A$22,005 before costs omitted from the example. This ratio alone is not a lending standard or recommendation to buy.
The deposit and transaction costs need their own funding. Money used for the deposit cannot simultaneously be counted as the business’s working-capital buffer.
Stress the assumptions
Reduce annual revenue by 15% to A$1.02 million. Hold direct costs at 65% of revenue and the other amounts constant. Cash before debt falls to A$32,000, giving only 0.44 times cover and a shortfall of roughly A$40,995.
This already looks weak. It may be worse if staffing costs cannot fall with revenue or if collection delays increase. Test those cases separately rather than assuming every cost is flexible.
A balloon reduces instalments, not the obligation
With a balloon, part of principal remains payable at maturity. Our tool shows a separate monthly saving target for that amount and includes it in annual commitments.
For a zero-interest A$300,000 loan over 60 months with a A$60,000 balloon, regular payments are A$4,000 monthly. Setting aside another A$1,000 monthly would build the balloon amount without assuming investment returns. Refinancing is not guaranteed.
Ask for these terms in writing
Check principal, deposit, interest basis, payment timing, term, balloon, security, guarantees, early repayment, default and any relationship with the sale agreement. Ask who bears disputes over the acquired business. Your solicitor and accountant should assess the actual structure.
Use business.gov.au’s acquisition due-diligence guidance alongside the NDIS-specific acquisition checks.
Try the numbers: open the acquisition cash-flow tool. Change revenue, direct costs and the balloon individually so you can see which assumption breaks the model first.
Sources & checking
- business.gov.au: buy an existing business · checked 2026-09-23
ProviderQMS editorial guidance and fictional examples. Source checking is not a professional endorsement. Our editorial method.