How to Finance a Business Purchase in NZ: Funding Options for Buyers

# How to Finance a Business Purchase in NZ: Funding Options for Buyers

Buying a business is one of the most significant financial decisions you will ever make. Whether you are purchasing a small café in Wellington or a mid-sized manufacturing operation in Auckland, the question of how to fund the purchase is often the biggest hurdle standing between you and business ownership. The good news is that New Zealand offers several practical funding pathways for prospective business buyers.

In this guide, we break down the most common ways to finance a business purchase in New Zealand, outline the pros and cons of each, and share tips to help you secure the funding you need.

1. Bank Loans and Commercial Lending

Bank finance remains the most traditional route for business acquisition in New Zealand. The major banks — ANZ, ASB, BNZ, Westpac, and Kiwibank — all offer commercial lending products designed for business purchases.

Typically, banks will lend between 50% and 70% of the purchase price, depending on the type of business and the security you can offer. You will generally need to provide a personal guarantee, and many banks will require property as collateral. The interest rates on commercial loans in NZ usually sit between 7% and 10%, depending on the risk profile.

Tips for success: Present a thorough business plan that includes realistic cash flow projections. Having an accountant prepare or review the financials will add credibility to your application. If the business has strong, consistent earnings, banks are far more likely to lend.

2. Vendor Finance (Seller Finance)

Vendor finance is one of the most popular and practical funding options in the New Zealand business market. In this arrangement, the seller agrees to let the buyer pay a portion of the purchase price over time, rather than requiring the full amount upfront.

A typical vendor finance deal might involve the buyer paying 50% to 70% of the price at settlement, with the remaining balance paid over one to three years at an agreed interest rate. The seller effectively becomes a lender.

What to watch out for: Make sure the vendor finance agreement is documented by a lawyer. Clarify the repayment schedule, interest rate, what happens if the business underperforms, and whether any security is required. Some sellers will want a general security agreement (GSA) over the business assets.

3. Using Personal Savings and Equity

Many business buyers in NZ fund part or all of their purchase through personal savings, KiwiSaver withdrawals (in limited circumstances), or equity released from their home. If you own property that has increased in value, you may be able to refinance your mortgage and use the additional funds toward the business purchase.

This approach has the advantage of avoiding external lenders and keeping your debt obligations simple. However, it also concentrates your financial risk — if the business struggles, both your home and your investment could be at risk.

Key consideration: Always speak with a financial adviser before using your home equity to fund a business purchase. Make sure you understand the worst-case scenario and have a plan to manage it.

4. Investor Partnerships and Private Equity

If you lack the capital to buy a business on your own, bringing in an investor or partner can be a practical solution. This might be a family member, a business associate, or a private investor who sees potential in the opportunity.

In New Zealand, partnership structures and company shareholding arrangements make it relatively straightforward to bring investors on board. You might retain a majority shareholding and day-to-day management control while the investor provides the capital.

For larger acquisitions, private equity firms and angel investor networks such as the NZ Angel Association may also be worth exploring.

5. Government Grants and Support Programmes

While the New Zealand government does not typically provide direct grants for purchasing existing businesses, there are several support programmes that can help with the costs of growing or developing a business after purchase.

Callaghan Innovation offers R&D grants for businesses focused on technology and innovation. New Zealand Trade and Enterprise (NZTE) provides support for businesses looking to export. Regional development agencies may also have funding or advisory programmes relevant to your industry.

Additionally, if you are a Māori business owner, Te Puni Kōkiri and various Māori development funds may offer financial support or favourable lending terms.

While these grants won't cover the acquisition price itself, they can significantly reduce the cost of post-purchase investment, freeing up cash flow to service your acquisition debt.

6. Combination Funding — The Most Common Approach

In practice, most business purchases in NZ are funded through a combination of the options above. A typical deal structure might look like this:

This blended approach spreads the risk and makes it easier to get each individual funding source across the line. Banks, in particular, are more comfortable lending when they see the buyer has meaningful personal investment in the deal and the vendor is willing to retain some exposure.

How Much Deposit Do You Need?

As a general rule, you should expect to contribute at least 20% to 30% of the purchase price from your own resources. Some smaller or lower-risk businesses may require less, while banks may want more for higher-risk industries such as hospitality or retail.

The more you can put in yourself, the more favourable your lending terms will be and the more negotiating power you will have with both the bank and the seller.

Getting Professional Help

Financing a business purchase involves legal, financial, and tax considerations that can be complex. Before committing to any funding arrangement, we strongly recommend engaging:

These professionals will more than pay for themselves by helping you avoid costly mistakes and secure better terms.

Final Thoughts

Funding a business purchase in New Zealand is entirely achievable with the right preparation and approach. Start by understanding your own financial position, then explore the options that best fit your situation. Vendor finance, in particular, is a powerful tool that many first-time buyers overlook.

If you are browsing businesses for sale on OpenBiz, take the time to note which listings mention vendor finance — it can be a strong signal that the seller is motivated and the deal is structured to help buyers succeed.

The key is to plan early, seek professional advice, and approach the funding process with the same diligence you would apply to evaluating the business itself.