Finance to Buy a Business in New Zealand: How Lenders Fund an Acquisition

A bank will usually fund part of a business purchase, not all of it. The rest comes from the buyer's own equity, and often from vendor finance (the seller leaving part of the price unpaid), equity in property, or lending against business assets. There is no standard deposit for buying a business in New Zealand: the amount depends on the cashflow, the tangible assets, the security on offer and the buyer's experience.

Key Takeaways

How lenders fund a business purchase

Buying a business is not funded like buying a house. Banks look at the whole transaction: the business you are buying, its cashflow, the purchase price, your experience, the security available and how the proposed debt will be repaid.

That usually produces a stack of funding sources rather than one loan. The pieces that can be combined are bank term lending, cash or equity from the purchaser, equity in residential or commercial property, lending secured against business assets, asset finance, vendor finance, working capital facilities and non-bank or specialist business lending.

Source	What it is	What to know
Your own cash	The deposit or equity you put in at settlement	Running down all your reserves can force a later short-term loan at higher interest
Bank term loan	A loan over an agreed term, fixed or variable rate	NBS, for example, lends up to a maximum of 20 years on its business term loan, and requires minimum 20% equity
Property equity	Security over your home or commercial property	It can form part of the structure but adds risks that need careful thought
Lending against business assets	A loan secured on the assets of the business you are buying	Lenders advance according to the appraised value of those assets
Vendor finance	The seller leaves part of the price to be paid after settlement	Counted as a liability by the bank, which will want first ranking security
Non-bank lender	A lender outside the main banks	Some are open to self-employed applicants and businesses without full financials

Two other routes get mentioned. An angel investor will usually want an equity stake in your business, and equity crowdfunding means selling shares to the public. Crowdfunding is governed by the Financial Markets Conduct Act, under which up to $2 million can be raised in 12 months without a product disclosure statement. Both mean giving up part of what you are buying, so they suit a different kind of buyer from someone who wants to own a small business outright.

KiwiSaver is not an option. It can only be used for a first home.

Banks and non-bank lenders

Banks are the first call for most buyers. The usual tests are a strong credit history, a solid business plan and collateral. The products are ordinary ones, term loans and lines of credit. They are not acquisition-specific, and what you are really asking the bank to do is accept the purchase as the thing the loan is for.

NBS's published business term loan shows what a bank product looks like. Its rates, current as at 8 September 2026 and subject to change without notice, start from 5.94% p.a. for six months or one year fixed, from 6.24% p.a. for two years fixed, from 7.99% p.a. variable, and from 8.49% p.a. on its Flexi Loan variable rate. Fees include an establishment fee from $450, and default interest at 4.00% p.a. above the loan rate. These are one lender's 'from' rates. Your margin, fees and conditions depend on the lender and the deal, so ask for the all-in cost in writing.

Non-bank lenders matter when the file does not fit a bank's box: a short trading history, incomplete financials, or a structure that needs more than one facility. Finance Corp, for example, compares options across banks and non-bank lenders and lists bridging finance for business asset sales or purchases among its own services. Pricing and conditions at non-bank lenders vary by lender and by deal, and the cost of that flexibility is something to compare line by line against the bank's offer.

A broker or adviser can approach several lenders for you. Finance Corp says its own advice is in most cases at no additional cost to the borrower. Confirm how any adviser is paid before you engage them.

How much deposit do you need?

The honest answer is that it depends, and the factors are specific. The equity you need depends on:

• the type of business and the purchase price
• the strength and consistency of cashflow
• the tangible assets being bought
• the security available
• your financial position
• your industry and management experience
• the loan term
• the lender's appetite for the industry and the deal

Two businesses selling for exactly the same price could require completely different funding structures. A business with strong, established cashflow and plenty of plant may need far less from you than a young professional practice with little beyond goodwill.

Some lenders also publish a floor for their own products. NBS says minimum 20% equity is required for its business lending, which is a condition of that product and not a market rule.

Equity does not have to be cash in the bank. Equity in residential or commercial property can form part of the structure. For owners who already have a business, refinancing assets owned outright, or releasing equity from commercial premises the business owns, can free cash that may be used for acquiring another business. That route suits repeat buyers more than first-timers.

The other side of the deposit question is how much you keep back. Lenders ask whether you have used every dollar of your available cash as the deposit. Running out of cash three months after settlement because every available dollar went into the purchase is not a great outcome for anyone. Running down your reserves can also force a later short-term loan at higher interest. If your equity is thin, a bigger vendor loan can be better than emptying your account.

Goodwill versus assets, and why the split matters

A business has two parts: goodwill and assets. Goodwill is the health of the business. If it has a strong customer base, a great reputation and high turnover, expect to pay more for it. Otherwise, expect to pay mostly for its assets.

That split matters to a lender because they care about what they can fall back on. A $2 million business purchase is not necessarily $2 million of assets the bank can take security over. The price can include goodwill, plant and equipment, vehicles, stock, intellectual property, customer contracts and commercial property. A business with significant tangible assets may be financed differently from a professional services business where much of the value sits in goodwill and recurring client relationships.

In practice, a bank can look to plant, vehicles and stock if things go wrong. Goodwill is the customer base and reputation, and it only has value while the business keeps trading. How much of each a lender will fund varies by lender and by deal, so ask early.

Several things drive the goodwill number. Due diligence should check how loyal customers and suppliers are to the current owner, which can affect how much you pay for goodwill. Get a professional to assess the assets, and if the owner raises the price, check whether the rise relates to goodwill. A buyer who cannot explain the goodwill figure will struggle to explain it to a lender.

A related risk: imagine buying a profitable business and finding that most customers only dealt with the previous owner. That is a risk to you and to the bank. Where the owner is critical, a transition period or vendor involvement after settlement can sometimes help reduce it.

Vendor finance and earn-outs

Vendor finance is where the vendor agrees to receive part of the purchase price after settlement, paid over time on agreed terms. It is often used to bridge the gap between what a purchaser can borrow from a bank and the agreed price. It has grown in popularity because of economic conditions and higher interest rates.

Owner financing in New Zealand is commonly structured in one of these ways:

• Deferred consideration: part of the price is paid later, in one or more instalments.
• Vendor loan: the seller effectively lends the buyer the balance, documented as a loan with repayment terms and ideally security.
• Earn-out: part of the price is only payable if the business meets agreed targets, for example revenue or profit thresholds over 6 to 24 months.
• Seller stays on: a transition or consultancy arrangement alongside the finance terms.

Earn-out targets can be financial or non-financial, such as retaining key customers or maintaining regulatory approvals. Earn-outs work well where the buyer is unsure, and the seller confident, about continued performance. The buyer reduces the risk of overpaying and the seller's investment is still protected.

How it sits beside the bank

Vendor finance does not bypass the bank. The bank will treat vendor finance as a liability in assessing the purchaser, and the bank's terms can affect the terms between buyer and seller. For example, banks will require first ranking security over the business assets. That pushes any security the vendor takes further down the order, which is why the two lenders need their terms agreed before settlement.

Vendor finance can offer terms banks will not, such as interest-only periods or tailored instalments. Interest is also negotiable: sometimes the trade-off is a slightly higher price with no interest. Buyers who expect to refinance with a bank later should agree early payout rights and any break fee.

The risks for each side

For the buyer, the risks are:

• repayments that look manageable on paper but are strained by seasonal dips, supplier price changes or unexpected repairs
• default clauses broad enough that the seller can accelerate the debt (make the whole amount due immediately) for minor breaches
• security or guarantees the buyer did not fully understand
• handover promises, such as introductions or the seller staying on, that were never written down
• claims about revenue, profit or customer retention that were never documented or tested

For the seller, the main risks are not holding enforceable security, vague repayment and default terms, a buyer who changes how the business runs and reduces earn-out performance, and tax timing on when income is recognised. Security should be registered correctly, including accurate PPSR details where registration applies.

One point applies to every deal. A seller's advertising and representations can engage the Fair Trading Act 1986 (misleading or deceptive conduct), and buyers should treat forecasts cautiously and insist on evidence. If a figure matters to the price, get it in the contract.

What the lender reads

The accounts and the cashflow

Cashflow decides most files. The lender needs to be comfortable that the business will generate enough sustainable cashflow to meet its existing commitments, pay you appropriately and service the new acquisition debt. Banks generally look at several years of financial information, which can include revenue, gross profit, EBITDA or operating profit, net profit, existing debt repayments, shareholder salaries, one-off or unusual expenses, capital expenditure and working capital requirements, and forecast earnings.

As a minimum, plan on two years. A buyer seeking funds should provide two years of the business's profit and loss statements. Banks generally require at least two years of history with all financial records, preferably longer, and want tax documents and income and expenditure to verify income.

The numbers are also more nuanced than the profit shown in the statements. There may be legitimate adjustments to historical earnings to reflect the business under new ownership, but a lender may take a more conservative view of some adjustments. If you are presenting adjusted earnings, be ready to evidence each adjustment line by line.

The seller's figures

Due diligence is understanding what assets, liabilities and commercial potential a business has, to make sure what the owner says is true. The buyer's accountant should check trends such as seasonality and law changes, solid grounds for the forecasts you have been given, a comparison of the books with independent industry information, stock levels (if there is a lot of stock, ask why) and how well the business chases money owed. Ask the owner why they are selling and compare the answer with the financial picture in the sales documents.

The sale agreement matters to the lender as well. Provide the sale and purchase agreement, a turnover warranty (a statement of the business's guaranteed turnover during a defined period) and any restraints of trade that stop the previous owner setting up in competition or contacting customers. The contract should include price and payment details, restraints of trade, whether staff stay, and a buffer period for financial due diligence. The agreement should also state whether the sale is GST inclusive or exclusive, and the GST rate, which could be 15% or 0% depending on the circumstances.

You, as the new owner

Banks assess you as the future owner. They may ask about your industry experience, your management experience, your financial position, any previous business ownership, how involved you will be, your plan for taking over from the owner, and whether key staff will stay. Buying outside your industry does not rule you out, but the bank will want to understand how you will manage the transition and any gaps.

Identify the skills the business needs against the skills you already have, show forecasts with contingencies, state the salary you intend to take, and say whether you plan to stay long term or sell on. Base your forecast somewhere between a best and a worst case. A lender also looks at payment patterns, such as whether you pay your bills on time, and each lender has its own paperwork, so what satisfies one bank may not satisfy the next.

One trap for owners who already trade: heavy tax deductions can work against you, because the lender looks at gross taxable income and large write-offs reduce it. If your own income supports the borrowing, think about that before the year-end.

Personal guarantees and security over your home

A bank may require security or a personal guarantee. A personal guarantee means that if you cannot repay the loan, the bank may seize your personal belongings, such as real estate or a car. A bank may also ask for a general security agreement over your assets, and other security can include a mortgage over your house. Talk to an experienced lawyer before agreeing to any of these.

Banks may consider residential property, commercial property, plant and equipment, vehicles, other business assets, a general security agreement over the business, and personal or director guarantees as security. Having a house is not necessarily a prerequisite for buying a business. Some deals can be funded mainly against the cashflow and assets of the business, particularly where earnings are strong and established. Others need more security or a larger equity contribution. The right question is whether the overall deal gives the lender an acceptable mix of cashflow, equity, security and risk.

If your home is used, understand the exposure. Personal guarantees can put personal assets on the line, and security interests can restrict refinancing or selling assets. Using your home also introduces additional risks. In short: a deal that fails with your home behind it costs you more than the deposit.

Guarantees can also come from the vendor's side. A seller financing the deal will usually want security, which can include a general security agreement over business assets and personal guarantees from directors or shareholders, particularly if the buyer is purchasing through a company. Buyers should also watch for a personal guarantee clause in a vendor finance agreement. Read both sets of security documents before you sign either.

A worked example

The numbers below are illustrative, not a lender's rules. The only lender figures used are NBS's published 'from' rates as at 8 September 2026.

The purchase: a business priced at $1,000,000. Assume $300,000 is plant, vehicles and stock, and $700,000 is goodwill.

The funding:

Source	Amount
Buyer's cash	$250,000
Vendor loan	$150,000
Bank term loan	$600,000
Total	$1,000,000

The bank will count the $150,000 vendor loan as a liability, so total debt is $600,000 + $150,000 = $750,000. Against $300,000 of tangible assets, that leaves $450,000 of debt resting on cashflow and goodwill, not on assets a lender can sell.

Year-one repayments, assuming the bank loan is repaid in equal principal over 10 years and the vendor loan is interest-free over five years:

• Bank interest at NBS's two-year fixed 'from' rate of 6.24%: $600,000 x 6.24% = $37,440
• Bank principal: $600,000 / 10 = $60,000
• Vendor loan: $150,000 / 5 = $30,000
• Total: $37,440 + $60,000 + $30,000 = $127,440

Say the business earns $220,000 a year after paying the owner a market wage. That covers the repayments $220,000 / $127,440 = about 1.7 times. If earnings dip to $176,000 as customers adjust to new ownership, which is worth budgeting for, cover falls to $176,000 / $127,440 = about 1.4 times.

Switch the bank loan to NBS's variable 'from' rate of 7.99% and interest becomes $600,000 x 7.99% = $47,940. Total repayments rise to $47,940 + $60,000 + $30,000 = $137,940. Cover is then $220,000 / $137,940 = about 1.6 times at full earnings, and $176,000 / $137,940 = about 1.3 times with the dip.

The same business is a comfortable deal at one rate and a tighter one at another. It is also a deal where the buyer's $250,000 has gone in entirely. The question lenders ask about the day after settlement applies: if you hold back $50,000 for working capital, the vendor loan or the bank loan has to grow by $50,000, and every figure above moves with it.

Before you sign

Understand your likely borrowing capacity before signing an unconditional agreement to purchase. Final approval will depend on the bank assessing the specific business, but early conversations tell you how much equity you may need and whether property security is likely to be required. Build a buffer period for financial due diligence into the contract, which protects you if the numbers do not hold up.

Timing also needs planning. Acquisition finance generally takes more assessment than a standard residential mortgage, and timing depends on the complexity of the deal, the quality of the financial information and how quickly it can be provided.

Deplexifi structures funding for business purchases across banks and other lenders, including how vendor finance and security sit alongside the bank's terms.

Frequently Asked Questions

Can I borrow money to buy an existing business in New Zealand?

Yes. Banks and other lenders can provide finance to buy an existing business. How much you can borrow depends on the business's cashflow, the price, the security, your equity and your experience.

How much deposit do I need?

There is no universal figure. It depends on factors including cashflow, assets and security, your financial position and experience, and the lender's appetite. NBS states minimum 20% equity for its own business lending, but that is one lender's product condition.

Can I buy a business without using my house as security?

Sometimes. Not every purchase requires residential property as security, and some can be funded mainly against the business's cashflow and assets. Other deals need extra security or more equity, and banks may ask for a personal guarantee or a mortgage over your house.

What is the difference between vendor finance and an earn-out?

With vendor finance, the seller leaves part of the price to be repaid after settlement on agreed terms. With an earn-out, part of the price is only payable if the business meets agreed targets, for example revenue or profit thresholds over 6 to 24 months.

Can I use KiwiSaver to buy a business?

No. KiwiSaver can only be used for your first home.

Treating the whole purchase price as lendable. Goodwill is part of the price, much of it may not be security the bank can rely on, and any vendor finance counts as debt in the bank's assessment.

Nothing here is regulated financial advice. Deplexifi arranges commercial finance for businesses — this article describes general lending practice and the published position of the sources listed below, not a recommendation for any individual business.