2. Security and Serviceability

These two factors go hand-in-hand and form the core of a bank’s lending decision.

Security

Banks rarely finance 100% of a business purchase. Instead, they expect you to contribute equity or offer additional security outside the business itself.

Typical lending ratios:

• Up to 70% of the purchase price if freehold property is involved.
• Often 50% or less if there is no property attached.

That means you’ll need to fund the balance yourself – either through savings, another asset, or third-party security. Consider where your equity contribution will come from early in the process.

This is particularly relevant if you plan to buy a caravan park with freehold land, which may improve your borrowing capacity compared to leasehold-only parks.

Serviceability

Even if you have strong security, your application won’t succeed unless the business can support the debt. This is where serviceability comes in: does the cash flow from the business comfortably cover the loan repayments?

If the numbers don’t stack up – or worse, the business doesn’t generate sufficient profit – it raises questions about the viability of the purchase. From the bank’s perspective, a lack of serviceability is a red flag.

Understanding what your position is before submitting you application can save you time and energy. Before approaching the bank, consider working through the numbers with an accounting team familiar with the industry you’re looking to buy in.

Its worth noting that going to directly to the bank is not always the best option, an experienced business finance broker may have access to options the banks don’t offer to its retail customers.

3. You, the Buyer

While the bank will assess the business, you are just as important.

Banks will evaluate:

• Your experience in the industry.
• Whether you’re an existing customer.
• Your personal financial position, including other debts.
• Your credit history, including any past bankruptcies or legal issues.

If you’ve never worked in tourism or hospitality, and you’re applying to buy a caravan park, the bank may ask for additional details to build confidence in your ability to run the business.

4. The Business Itself

Once the broader picture is considered, the bank will dig into the specific business you’re buying. This includes:

• Financials: Ideally three years of accountant-prepared financial statements (P&L, balance sheet, trading history).
• Valuation: If freehold property is involved, a formal valuation is almost guaranteed. Even without property, some banks may still request a business valuation.
• Lease Terms: If the business is a tenant, the lease becomes important. Banks often require a right of entry clause, which gives them the legal ability to take over the business premises if the loan defaults. This involves coordination with the landlord, their solicitors, and sometimes the landlord’s bank.

Before submitting the businesses numbers to a lender, ensure you have had them professionally considered so you know exactly what you are walking into – no hidden surprises, no guesswork. A business accountant with experience in the specific industry is key to a clear picture.

5. The Business Plan

Banks want to see:

• Forecasts for revenue, profit, and cash flow.
• Details on how you’ll run the business.
• Sales strategies, market positioning, and growth opportunities.
• Supplier relationships, staffing plans, and customer retention strategies.

If you plan to a buy caravan park, your plan should also address seasonal fluctuations, marketing strategy for tourists, and operational roles if you’re not hiring a manager.

A shaky business plan can be the reason your finance gets knocked back. Understanding what the bank needs to see and knowing what works will set you up to hit the ground running once you take over.

Final Thoughts

Whilst this list isn’t exhaustive, it highlights the Banks want to see:

• Forecasts for revenue, profit, and cash flow.
• Details on how you’ll run the business.
• Sales strategies, market positioning, and growth opportunities.
• Supplier relationships, staffing plans, and customer retention strategies.

If you plan to a buy caravan park, your plan should also address seasonal fluctuations, marketing strategy for tourists, and operational roles if you’re not hiring a manager.

A shaky business plan can be the reason your finance gets knocked back. Understanding what the bank needs to see and knowing what works will set you up to hit the ground running once you take over.

most common hurdles when seeking bank finance for a business purchase. Whether you’re buying a café, a manufacturing business, or looking to buy a caravan park, the fundamentals remain the same, banks want low risk, strong cash flow, and confidence in you as the buyer.

Being prepared – financially, strategically, and personally – can make all the difference when it comes to securing the funding you need.

Need help preparing for a business purchase or loan application? At Rogerson Kenny Business Accountants we have over 40 years of working with business in the tourist and accommodation sector – there’s not much we haven’t seen! Before you take the next steps in your goal to buy a caravan park, get in touch and have the experts in your corner.