How much deposit do I need to buy a business in NZ?

There's no single rule, because it depends on the business, the price, the assets included and the lender. Banks often want buyers to contribute a substantial share of the price, especially where much of it is goodwill. Many buyers use equity in their home or another property to make up the difference, alongside cash and any vendor finance.

Why won't banks lend much on goodwill?

Goodwill is the value of a business's reputation, customers and earnings beyond its physical assets. It can't be sold separately if things go wrong, so banks usually treat it as weak security. That's why buyers of service businesses, cafes and trade businesses often need property security or a larger cash contribution to complete the purchase.

What is vendor finance when buying a business?

Vendor finance is when the seller agrees to receive part of the price later, usually in instalments after settlement. It reduces what the buyer needs to borrow at settlement and shows the seller believes the business will keep performing. The terms should be set out clearly in the sale and purchase agreement by your lawyer.

Can I use my home to buy a business?

Yes. Many buyers use equity in their home, a rental property or a family trust property to fund part of the purchase price or the working capital. fundU lends by first or second mortgage over New Zealand property, so a second mortgage can sit behind your existing home loan without replacing it.

Does Investment Boost apply to assets I buy with a business?

Investment Boost gives a 20% upfront deduction on eligible new assets, and assets new to New Zealand, acquired from 22 May 2025. Second-hand New Zealand assets are excluded, so used plant and equipment bought as part of an existing business generally won't qualify. New equipment you buy after taking over may. Check with your accountant.

Buying a Business in NZ: A Practical Finance Guide

Buying an established business can be one of the best moves a Kiwi owner makes. You get customers, staff, systems and cash flow from day one, instead of spending years building them. With 97.2% of New Zealand enterprises being small businesses of fewer than 20 employees, according to MBIE, there's a steady flow of cafes, trade businesses, manufacturers, retailers and service firms changing hands every year.

The hardest part is often the finance. Banks can be cautious about lending against goodwill, settlement dates are fixed, and the price is only part of what you'll need. This guide explains how to work out the real cost of buying a business, check what you're buying, put the funding together and settle with enough working capital to trade confidently. We'll also show how fundU uses property equity to help buyers complete.

What does it really cost to buy a business?

The real cost of buying a business is the purchase price plus everything you need to settle and trade through the first few months. Buyers who plan only for the price often reach settlement short of cash.

Budget for all of these:

Cost	What it covers	Why it's often missed
Purchase price for goodwill	Customers, brand, systems, earnings	The headline figure everyone focuses on
Plant, equipment and vehicles	Physical assets included in the sale	Sometimes priced separately from goodwill
Stock at valuation	Stock on hand at settlement, counted on the day	Usually added on top of the price and unknown until settlement
Working capital	Wages, rent, suppliers and tax in the first months	Assumed to come from trading, but takings lag
Lease costs	Bond, rent in advance, any assignment requirements	Landlord approval can add conditions
Professional costs	Lawyer, accountant, valuer and any business adviser	Easy to underestimate for a larger deal
Changeover costs	Rebranding, IT, insurance, licences, training	Small individually, significant together

Working capital is the one that catches most buyers out. Customers who paid the previous owner on account will pay you on the same terms, so money won't come in straight away. Meanwhile your first payroll, your first rent and your first supplier invoices all arrive on time.

How do buyers usually fund a business purchase in New Zealand?

Most business purchases are funded by a stack of sources rather than one loan. The mix depends on the buyer's cash, the business's assets and how much of the price is goodwill.

Common layers are:

Your own cash. Savings or proceeds from a previous sale.
Vendor finance. The seller agrees to receive part of the price in instalments after settlement.
An earn-out. Part of the price depends on the business hitting agreed targets after you take over.
Bank lending. Often available for part of the price, particularly where there are strong tangible assets and a track record.
Equipment finance. For plant and vehicles, though it won't cover goodwill or stock.
Property-secured lending. Borrowing against equity in your home, a rental, a family trust property or a supporting party's property to fill the gap.

Because goodwill can't be sold on its own if things go wrong, banks usually treat it as weak security. That's why property equity so often completes a business purchase. It gives the lender strong security, so the loan isn't limited by how much of the price is goodwill.

What due diligence should you do before you buy?

Due diligence is the process of checking that the business is what the seller says it is before you commit. It protects you, and it's exactly what a lender will want to understand.

Work through this checklist with your lawyer and accountant:

Company details. Check the company on the Companies Office register and the NZBN register: directors, shareholders, history and any name changes.
Financial performance. Review at least two to three years of accounts, plus recent monthly figures and bank statements. Make sure sales in the accounts match deposits in the bank.
Tax position. Ask for IRD statements showing GST, PAYE and income tax are up to date. Tax arrears in a company can become your problem in a share purchase.
Security interests. Search the PPSR for security interests registered over the business assets, and make sure they'll be released at settlement.
Lease. Check the term, rights of renewal, rent reviews, make-good obligations and whether the landlord must approve the assignment.
Staff. Understand who's transferring, their employment agreements, leave balances and any key-person risk.
Customers and suppliers. Check concentration, contracts, and whether key relationships depend on the seller personally.
Licences and consents. Food, liquor, trade or operating licences that need transferring or reapplying for.
Assets. Confirm what's included, its condition and whether it's owned or leased.

Make the sale and purchase agreement conditional on finance and due diligence, with realistic dates. A few extra days to arrange funding costs far less than being forced to settle without it.

Should you buy the shares or the assets?

Most small business sales in New Zealand are either a purchase of the business's assets or a purchase of the shares in the company that owns it. The choice affects risk, tax and what the lender will look at.

	Asset purchase	Share purchase
What you buy	Goodwill, equipment, stock, name and contracts	The company, including everything it owns and owes
Past liabilities	Generally stay with the seller	Stay with the company you now own
Contracts and leases	Usually need transferring or assigning	Continue in the company's name
Due diligence focus	The assets and the trading	The company's full history, including tax and debts
Common for	Cafes, retail, trade businesses, smaller operators	Larger businesses and those with valuable contracts

Your lawyer and accountant will advise on which structure suits your situation. From a funding point of view, a lender will want to see the sale agreement, the settlement date and how the purchase will be completed.

How does using property equity work when buying a business?

Property equity is the difference between what a property is worth and what's owed on it. A lender can take a mortgage over that property and advance a loan for the business purchase.

fundU is a direct private lender. We lend $20,000 to $1m for business purposes, secured by a first or second mortgage over New Zealand residential, commercial or industrial property:

Second mortgage. If you have a home loan with your bank, a second mortgage sits behind it, so your bank loan stays in place.
First mortgage. If the property is unencumbered, or it makes sense to refinance the existing lender out, we can lend by first mortgage.
Security from a family trust or supporting party. Property held in a family trust, or owned by a family member willing to act as guarantor, can be considered. Our guide to borrowing against family trust property explains how that works.

To estimate what you might have available, see our guide on how much you can borrow against your property. For more on the pros and cons, read using home equity for business.

What exit plans work for business purchase finance?

Short to medium-term finance needs a clear plan for how it will be repaid. For a business purchase, the most common exits are:

Refinance to a bank once you've owned and run the business for a period and can show consistent trading in your name.
Business cash flow over the term of the loan.
Sale of another property or asset, such as a rental or a previous business.
Vendor finance or earn-out timing, where the purchase structure frees up cash later.

Depending on the approved terms, repayments can be interest-only, capitalised interest with no scheduled monthly repayments during the term, or principal and interest. Capitalised interest can be useful in the first months after settlement, while you learn the business and working capital settles down.

What does the timeline look like from offer to settlement?

Business purchases run to fixed dates, so line up finance early. A typical sequence:

Sign a conditional agreement subject to finance and due diligence.
Start your finance enquiry straight away, with the agreement, a summary of the business and details of the property you'll offer as security.
Complete due diligence with your accountant and lawyer.
Receive loan approval, then arrange a registered valuation of the property if required.
Confirm the conditions of the agreement.
Lawyers prepare the mortgage and settlement documents.
Settle: stock is counted, funds are paid and you take the keys.

Because fundU makes its own decisions, we can often work to tight settlement dates. In some cases, funding can happen in as little as 24 hours once approved.

What mistakes do buyers make with business purchase finance?

Most problems in a business purchase come from timing and assumptions rather than from the business itself. The same few mistakes come up again and again.

Signing an unconditional agreement before finance is approved. If the funding falls through, you can be left in breach of the contract.
Forgetting stock and working capital. The price is agreed months ahead, but stock is counted on settlement day and trading cash is needed the day after.
Relying on the seller's figures alone. Accounts prepared for the sale should match bank statements and IRD records.
Stretching too far on the first day. Borrowing every dollar available for the price leaves nothing for a slow first month or a broken oven.
Leaving the lease until last. A landlord who delays approving the assignment can hold up settlement.
No plan for the exit. Short-term finance needs a realistic path to repayment, agreed before you settle.

Avoid these and you give yourself the best chance of a smooth handover and a strong first year.

Example scenario

A couple wanted to buy an established bakery in Hawke's Bay. The agreed price for goodwill and equipment was $420,000, with stock at valuation on top. They had $90,000 in savings, and the vendor agreed to finance $60,000 over two years. Their bank was reluctant to lend against goodwill, and they also needed working capital for the first few months.

The couple's home was worth about $980,000, with a bank mortgage of around $410,000. fundU approved a second mortgage of $320,000 behind the bank loan, which covered the remaining purchase price, stock and a working capital buffer. The loan was set up with capitalised interest for the term, and the planned exit was a bank refinance once the couple had a trading history in their own name. This is an illustrative example, not a real customer.

Key takeaways

Budget for the full cost: price, stock, working capital, lease costs, professional costs and changeover costs.
Most purchases are funded by a mix of cash, vendor finance, bank lending and property equity.
Banks often lend cautiously against goodwill, so property security frequently completes the deal.
Do thorough due diligence, including Companies Office, NZBN, PPSR, tax and lease checks.
Make your agreement conditional on finance, and start your funding enquiry as soon as you sign.
Plan your exit before you settle, whether a bank refinance, cash flow or an asset sale.

Ready to make an offer?

If you're buying a business and need funding to complete, fundU can help. We're a direct private lender offering $20,000 to $1m secured on New Zealand property, with decisions made by our own team. Find out more about business acquisition finance, then see if you qualify. It takes a couple of minutes, doesn't affect your credit score, and a lending specialist will call you back. You can also call us on 09 875 4577.

Buying a business: a practical finance guide