Liquidity pressure is becoming one of the defining challenges of today’s private markets, particularly for high-growth tech businesses in Australia. With fewer companies going public and IPO timelines stretching, early investors and founders are increasingly seeking alternative ways to withdraw value. This shift has pushed private credit and secondary solutions into a critical role.

In this article, we explore the liquidity options for investors, review the range of funding methods available, and take a closer look at the lesser-known role of debt in facilitating company share buybacks, including a case study from Mighty Partners.

What Is a Private Company Share Buyback?

A share buyback is when a company purchases its own shares from existing investors. In public markets, a buyback often signals confidence in the company’s future and can increase the value of the remaining shares.There are also rules and structures that govern how public-market buybacks are executed.

Here, we focus on private markets, where the effect is similar. A buyback gives early investors a clean way to access liquidity without running a full secondary sale. It also strengthens the position of remaining shareholders by reducing dilution and reinforcing the company’s commitment to long-term performance.

3 Ways to Fund a Share Buyback in Australia

How to fund a buyback depends largely on the company's current cash position and growth stage. Here are the three primary methods:

1. Operate profitably (Retained Earnings): If the business is generating steady profits, it can agree on a fair market price and buy back shares using retained earnings. This gives early investors a straightforward liquidity path without adding debt or bringing new shareholders onto the register.
2. Secondary sales: The most common option is a secondary sale, where shares move from one private shareholder to another. As this market grows, so does the infrastructure supporting it. In Australia, FinClear has launched FCX — a fully regulated private-markets platform that manages share registry, capital raising and, importantly, secondary transactions for unlisted companies and funds.
3. Debt-funded Buyback (Private credit): A lesser-known but effective option for tech businesses is using private credit to fund the buyback. If the company is growing but not yet profitable enough to use its own cash, a term loan can bridge the gap. This lets the business repurchase shares without running a secondary process, and instead of transferring ownership to a new investor, it consolidates ownership among existing shareholders.

How Debt Financing Works for a Share Buyback

Debt funding allows a company to use a loan to repurchase shares rather than funding the buyback from profits or running a secondary sale.

The process is simple:

1. The company agrees on a buyback price: Founders and investors align on valuation and the number of shares to be repurchased, keeping the process  clean and avoiding negotiations with new investors.
2. A lender provides a term loan: A private credit provider, such as Mighty Partners, issues a loan based on the company’s revenue, growth, and cash-flow outlook, not just hard assets or profitability. Typical loan features include 24-35 month term, monthly repayments and no dilution.
3. Funds are used exclusively for the buyback: The company draws down the loan and uses the funds to purchase shares from selected shareholders. No ownership is transferred to external parties.
4. Shares are cancelled or redistributed: Repurchased shares are usually cancelled or absorbed into treasury, increasing the ownership percentage of remaining shareholders; founders, staff, and investors.
5. The company repays the loan over time: Repayments come from operating cash flow as the business continues to growth. There's no pressure for a near-term exit or a rushed secondary sale.

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Case Study: Australian Health Tech Business

One of our portfolio companies is a health-tech business that has been operating for more than 10 years and was growing 67% year-on-year at the time of funding. The founders were facing increasing liquidity pressure to provide options for a small group of long-standing shareholders:

• Two early accelerator investors wanting to realise gains.
• One employee looking to fund home renovations.
• Two early HNW investors wanting to recycle capital into new opportunities.

All five had been invested for close to a decade and remained committed to the business, they simply needed access to liquidity for personal or reinvestment needs.

With the founders planning to run the company for at least another five years, a major liquidity event wasn’t expected anytime soon. They also hold 60% of the equity, giving them strong alignment and long-term conviction.

Although existing investors were open to secondary transactions, approvals for a mixed buyback and secondary process would have added unnecessary complexity. The company instead explored a credit solution.

Mighty Partners provided a non-dilutive $650k credit facility, with an initial $200k draw over a 24-month term. The funds were used solely to support the share buyback, allowing existing shareholders to increase their ownership without affecting the company’s growth plans.

Summary

As private markets in Australia mature, liquidity is becoming a core part of company building, not a one-off event tied to an IPO or acquisition. Founders and boards now have more tools than ever to support long-standing shareholders, streamline their cap table, and strengthen alignment for the next stage of growth.

Debt funding is emerging as a practical, flexible option in this mix. It gives companies the ability to deliver liquidity without slowing momentum, diluting ownership, or taking on unnecessary complexity.

If your business is exploring liquidity options, whether for early investors, employees, or founders, we can help you decide the right path forward.

Get in touch with Mighty Partners to explore non-dilutive credit solutions for your next buyback.