This discussion explores one of the most common and misunderstood questions in the Australian RTO transaction market: can a buyer actually secure funding to purchase an RTO? The conversation brings together Infinity Business Brokers and specialist finance adviser Grono Group, represented by Rami Farjou, to unpack how lenders currently assess RTO acquisitions.

The content is particularly relevant for prospective RTO buyers, vendors preparing their business for sale, and advisers supporting transactions in the education sector. Funding remains a critical gating issue in most RTO sales, and misunderstanding lender expectations is one of the leading causes of delays and failed deals.

Importantly, this discussion reflects what is happening on the ground in the post-COVID lending environment, rather than theoretical funding models.

 

The lending environment for RTO acquisitions

Why the RTO sector has historically been challenging

The RTO sector has experienced periods of heightened lender caution, particularly following the collapse of several large education groups and increased regulatory scrutiny. This risk sensitivity was compounded by COVID-19, which disrupted enrolments, international student flows, cash collection cycles and overall revenue certainty.

From a lender’s perspective, education businesses sit at the intersection of compliance risk, revenue timing risk and reputational exposure. As a result, RTO funding has never been treated as a simple “business loan” category.

Signs of improvement in lender appetite

Despite these challenges, lender sentiment toward education businesses has improved. According to Grono Group’s experience, performance across the education sector has stabilised and strengthened, particularly through recent quarters, supported by broader economic recovery and clearer financial reporting standards.

However, this improvement does not mean banks are less cautious. Rather, they are more selective and more analytical.

 

There is no “standard” funding amount

A key insight from the discussion is that there is no fixed funding threshold or standard loan size that banks are comfortable with. Each RTO transaction is assessed on its own merits.

Lenders are no longer focused solely on profitability. Instead, they assess a combination of interrelated factors, including:

• The quality and sustainability of earnings

• Cash flow strength and predictability

• Receivables ageing and collection risk

• Revenue concentration and student mix

• Balance sheet strength

• Security and risk mitigation

• The buyer’s experience and capacity to operate the RTO

This is why two RTOs with similar headline profits can receive very different funding outcomes.

 

Financial quality matters more than profit alone

Clean financials are non-negotiable

One of the strongest messages for buyers and vendors alike is that financial presentation matters. Lenders expect:

• Three years of accountant-prepared financial statements

• Up-to-date ATO portal records with no undisclosed liabilities

• A clear and credible balance sheet

• Transparent treatment of receivables, liabilities and cash flow timing

For RTOs, this is particularly important given issues such as prepaid fees, staged course delivery and delayed collections from certain student cohorts.

Receivables and cash flow scrutiny

Receivables are examined closely. Lenders want to understand:

• How quickly students pay

• Whether outstanding amounts are genuinely collectible

• Whether historic receivables reflect students who may not return or complete

Poor receivables quality can materially weaken an otherwise profitable RTO in the eyes of a lender.

 

Buyer preparation before seeking finance

What buyers should have ready

Before approaching a finance adviser or lender, buyers are expected to have their own affairs in order. This typically includes:

• Personal and business financial statements

• Evidence of asset and liability position

• A clear understanding of serviceability

• A concise CV or bio outlining relevant experience

• Disclosure of any existing businesses or assets

Where buyers already operate businesses, these can sometimes support the acquisition by strengthening security or serviceability.

Business plans and projections add weight

While not always mandatory, a clear business plan and forward projections significantly improve funding outcomes. Lenders want to understand not just what is being bought, but how it will be run and how performance will be sustained or improved.

 

Share sales and lender risk

RTO transactions are almost always structured as share sales. This introduces additional lender considerations, including:

• Historical compliance and reputational risk

• Potential undisclosed liabilities

• Ongoing regulatory exposure

This is why strong legal documentation, warranties and professional due diligence are essential. Lenders expect these risks to be clearly identified and appropriately managed before funding is finalised.

 

Timing expectations and deal realism

Typical funding timeframes

Even with good preparation, RTO funding is not instantaneous. Indicative timeframes discussed include:

• 2–4 weeks to obtain indicative terms

• A further 2–4 weeks for formal approval and documentation

In practice, buyers should expect a 6–8 week process, with the understanding that complexity or incomplete information can extend this further.

How buyers can shorten the process

The most effective way to reduce timeframes is preparation and full disclosure. When information is complete, accurate and consistent, lenders can move more quickly and with greater confidence.

 

Deal structuring and funding flexibility

The discussion also highlights that funding does not need to be binary. Depending on circumstances, transactions may involve:

• Partial bank funding

• Existing equity release

• Vendor finance components

• Structured “subject to finance” arrangements

While these structures must be handled carefully to protect all parties, they can materially improve transaction viability when aligned with sound legal and commercial advice.

 

Practical interpretation for buyers and vendors

For buyers, the message is clear: funding is achievable, but only with realistic expectations, strong preparation and a clear operating plan.

For vendors, the takeaway is equally important. A well-prepared RTO with clean financials, transparent risks and sensible deal structure is far more likely to transact successfully — not because buyers want it more, but because lenders will support it.

Funding is not an afterthought in an RTO sale. It is a central pillar of deal execution.

 

Optional next step

If you would like to discuss how funding considerations may apply to your specific RTO acquisition or sale scenario, you are welcome to book a confidential discussion with the appropriate advisers.