Buying an established business can be the fastest route to owning a profitable operation, with customers, staff, suppliers and systems already in place. The hard part is often the finance. Banks tend to lend against what they can touch, and a big share of most business purchase prices is goodwill, which they can't. fundU solves that by lending against property instead.
We're a direct New Zealand lender. Our business acquisition finance ranges from $20,000 to $1m, secured on residential, commercial or industrial property, and we make our own decisions quickly so you can meet your finance condition and settle on time.
How can you finance buying a business in New Zealand?
Most buyers use a mix of their own cash, a bank loan, vendor finance or a property-secured loan. The right mix depends on how much equity you have, the size of the deal and how much of the price is goodwill.
A property-secured loan from fundU works differently from a typical bank acquisition loan. The bank will usually want to see several years of the seller's financial statements and will lend against tangible assets, then ask you to fund the rest in cash. We look at the property you're offering as security, the business you're buying and your plan for repaying the loan. That means the goodwill, stock and working capital can all be included in one facility, as long as the property equity supports it.
We can lend by second mortgage, sitting behind your existing bank home loan so it stays exactly as it is, or by first mortgage where the property is unencumbered or it makes sense to refinance the current lender out.
What can a business acquisition loan cover?
It can cover most of the costs of buying and taking over a business. Typical uses include:
- The purchase price, including goodwill, which is often the largest component
- Stock at valuation, which is usually counted on the day before settlement and added to the price
- Plant, equipment and vehicles that come with the business
- A lease bond or guarantee if the landlord needs one to approve the lease assignment
- Working capital to cover wages, supplier accounts and rent in the first months under your ownership
- Legal and accounting costs for due diligence and settlement
- Improvements you plan to make straight away, such as a refresh, new systems or marketing
Funding the working capital is easy to overlook. Many buyers stretch to pay the price and then find there's nothing left for the first payroll. Suppliers may also want new owners to trade on shorter terms for a while, and the seller's debtors usually stay with the seller, so the first month or two of cash coming in can be thinner than the sales figures suggest. Our working capital finance page explains how that buffer can be funded.
If the business comes with its own building, or you'd like to buy the premises as well, our commercial property loans page covers how we lend against commercial and industrial property.
Why is goodwill hard to fund, and how does property security help?
Goodwill is the value of a business beyond its physical assets: its reputation, customer base, location, systems and brand. It's real value, but a lender can't sell goodwill on its own if things go wrong, so most banks lend very little against it.
That leaves buyers needing a large cash contribution. Property security changes the picture. Because our loan is secured by a property you, your company, your family trust or a supporting guarantor owns, we don't have to rely on the business itself as security. The goodwill becomes something the loan can pay for, rather than a gap you need to fill with savings.
Good to know: Many business sales are treated as the sale of a going concern for GST, but not every deal qualifies. Check with your accountant early whether GST will need to be paid at settlement, so it's built into your funding if needed.
How does timing work around the sale and purchase agreement?
Timing is everything in a business purchase. Most agreements for the sale and purchase of a business include conditions such as finance, due diligence and the landlord's consent to assign the lease, each with its own deadline.
A typical sequence looks like this:
- Negotiate and sign the agreement with a finance condition that gives you realistic time.
- Enquire with fundU straight away so we can start looking at the property security while you do due diligence.
- Complete due diligence. Review the accounts, lease, staff agreements, supplier contracts and any registered security interests on the PPSR.
- Receive indicative terms from our credit team and confirm the finance condition once you're comfortable.
- Landlord's consent to the lease assignment is arranged, which can take a few weeks.
- Valuation and loan documents. A registered valuer may confirm the property value while the lawyers prepare the mortgage documents.
- Settlement. Stock is counted, the price is paid and you take the keys.
Our guide to buying a business in New Zealand covers each step, including what to look for in due diligence.
Share purchase or asset purchase: does it change the funding?
It changes what you're buying, but it doesn't change how we look at the loan. In an asset purchase, you buy the business's assets, goodwill and stock, usually through your own new company. In a share purchase, you buy the company itself, including its history and any liabilities.
Because fundU lends against property, either structure can be funded. The structure affects your due diligence, your tax position and the loan documents, so your lawyer and accountant will guide the choice. If you're setting up a new company to buy the business, register your details and get an NZBN early so the paperwork isn't held up.
How does a bank acquisition loan compare with fundU?
Each suits a different buyer. A bank is often ideal when you have a large cash deposit and a clean deal. fundU is often the better fit when goodwill is high, time is short or your circumstances don't fit bank policy.
| Typical bank acquisition loan | fundU property-secured loan | |
|---|---|---|
| What it's secured on | Business assets plus often your home | Property you nominate |
| Goodwill | Limited lending | Can be funded, subject to property equity |
| Cash deposit | Usually substantial | No set cash deposit |
| Paperwork up front | Several years of the seller's financials, your plan and more | No financial statements needed for the initial assessment |
| Decision time | Often weeks | Fast, made by our own team |
| Term | Long term | Short to medium term, then often a bank refinance |
What's the exit plan for an acquisition loan?
For most buyers, the exit is refinancing to a bank once you've owned and run the business for a year or so. By then you have your own trading figures, a relationship with the business and a track record the bank can assess.
Other common exits include repaying from business cash flow, selling a property, or a planned capital injection from a partner or family trust. Our guide on the exit strategy for short-term business loans explains how to plan this from day one.
Example scenario
A couple in Hawke's Bay agree to buy an established plumbing and gas fitting business for $520,000, made up of $380,000 for goodwill, $90,000 for vans and tools and about $50,000 of stock. The bank will only lend against the vans and wants them to contribute most of the goodwill in cash. The agreement has a finance condition of fifteen working days.
The couple's family trust owns their home, worth about $1.05m, with $300,000 owing. fundU lends $600,000 by second mortgage, with the trust as a guarantor, covering the purchase price plus $80,000 of working capital for the first months of wages and supplier accounts. The bank home loan stays in place. Interest is capitalised for the term, and the plan is to refinance to a bank after twelve months of trading under their ownership. Read more about borrowing against family trust property.
What you'll need
For the initial assessment, have these ready:
- A copy of the signed or draft sale and purchase agreement, including condition and settlement dates
- The price breakdown: goodwill, plant, stock and any other items
- Any information the seller has provided, such as a summary of sales and profit
- Details of the property offered as security, who owns it and what's owing
- How much working capital you'll need in the first few months
- Your plan for repaying the loan
- Your NZBN or the details of the company or trust that will buy the business
Ready to buy your business?
The right business doesn't come up often, and sellers tend to favour buyers who can move with certainty. With property equity behind you and a direct lender making its own decision, you can make your offer with confidence.
When you're ready, start your enquiry. It's free, takes a couple of minutes and doesn't affect your credit score, and a fundU lending specialist will get back to you by phone. Or call us directly on 09 875 4577.
Frequently asked questions
Can fundU finance the goodwill when I buy a business?
Yes. Goodwill is often the largest part of a business purchase and the part banks are least comfortable lending against, because it has no physical form. Our loans are secured on property rather than on the business being bought, so goodwill can be funded along with stock, plant and working capital, subject to the property equity available.
How much deposit do I need to buy a business with fundU?
There's no set cash deposit. What matters is the equity in the property offered as security, such as your home, a rental, commercial premises or a family trust property. In some cases that equity can fund the whole purchase, including stock and working capital, so you don't have to empty your savings to take over.
Can fundU work to my finance condition date?
We make our own lending decisions, which helps when a sale and purchase agreement has a tight finance condition. Tell us the condition and settlement dates at your first enquiry. Funding can happen in as little as 24 hours once approved in some cases, but we never promise a date, so talk to us before you sign if you can.
Can I buy a business with no experience in that industry?
We consider it case by case. Relevant experience helps, and so does keeping key staff or having the seller stay on for a handover period. Because our loans are secured on property, we focus on the security and a realistic repayment plan rather than requiring a long track record in the industry.
What's the usual way to repay a business purchase loan?
Our loans are short to medium term, so a clear exit is important. Many buyers refinance to a bank once they have run the business for a year or so and can show their own figures. Others repay from business cash flow, the sale of a property or a later capital injection.
Can I buy the freehold property along with the business?
Yes, where the total loan fits within $20,000 to $1m and the security stacks up. Buying the building with the business can be a strong move. See our commercial property loans page for how we look at commercial and industrial premises as security.
A practical next step
Ready to see what's possible?
Tell us what the business needs, when you need it and what property is available. A fundU lending specialist will call you back to talk it through — enquiring is free and won't affect your credit score.