Mr's short answer
Yes. Buying an existing business is a common reason New Zealand owners borrow. Lenders look at the business's history, the price against its profits, your experience, how much you're contributing, and what security is available. Property security often does most of the work, from $20,000 to $5,000,000. Do proper due diligence, and line up finance before you go unconditional.
Key points
- Lenders assess both the business you're buying and you as the new owner.
- The seller's financials and bank statements are key evidence.
- Property security is the most common way to fund a purchase.
- Make your sale agreement conditional on finance and due diligence.
Buying a going concern can be a faster route to owning a business than starting from scratch: customers, staff, suppliers and systems are already there. It’s also a big financial decision, and Mr gets plenty of questions about how to fund it. Here’s the lay of the land.
How do lenders look at a business purchase?
They’re assessing two things at once: the business and you.
The business:
- its trading history — usually two or three years of financial statements;
- how steady its income is, ideally visible in bank statements and GST returns;
- the price compared with its profits;
- whether income depends on the current owner personally (a big risk if they’re leaving).
You:
- your experience in the industry or running a business;
- your credit history;
- how much you’re putting in;
- what security you can offer.
What are the common ways to fund a purchase?
| Funding source | How it works | Notes |
|---|---|---|
| Property-secured loan | Borrow against your home, a rental or commercial property | The most common route; $20,000 to $5,000,000 |
| Bank acquisition lending | A bank lends against the business and your security | Usually needs strong financials and a sizeable contribution |
| Vendor finance | The seller leaves part of the price owing, paid over time | Shows the seller’s confidence; terms vary widely |
| Your own savings | Cash contribution | Reduces borrowing and reassures lenders |
| Mix of the above | Combining sources | Common for larger purchases |
Using equity in a rental or commercial property is often a cleaner choice than the family home — see can I use commercial or rental property as security?
What due diligence should I do before borrowing?
Lenders do their checks, but your own matter more. Before going unconditional:
- Financial statements for the last few years — and ask your accountant to review them.
- Bank statements and GST returns that match the accounts.
- Leases — premises lease term, rights of renewal, rent reviews.
- Key customers and suppliers — any concentration risk, any contracts that end with the sale.
- Staff — employment agreements, holiday pay owed, key people staying.
- Tax — confirm there’s no hidden IRD debt that could affect the business.
- Assets — what’s included, condition, and anything on the PPSR.
Make the sale agreement conditional on finance and due diligence, with enough time to do both properly.
If you’re weighing up a purchase and want to know how it could be funded, ask a specialist early — ideally before you sign. There’s no credit check to ask.
How much can I borrow to buy a business?
That depends on the security and the business. Property-secured lending can reach up to $5,000,000 where equity supports it. Unsecured options, typically $5,000 to $500,000, are sized on trading history, which is tricky when you haven’t owned the business yet. Read how much can my business borrow? for how lenders think about the number.
What helps after settlement?
- Keep the business account separate from day one.
- Hold a buffer for the first few months while you learn the rhythms.
- Know the tax calendar — the tax due dates tool helps.
- Track performance monthly against the seller’s numbers.
- Introduce yourself to key customers and suppliers early, so relationships transfer with the keys.
- Check every direct debit and account the seller had set up, and close or transfer them cleanly.
Your own trading history starts on day one. Our page on how long you need to be trading explains why that matters for your next loan.
An illustrative example: buying the business you work in
This scenario is made up.
A workshop manager in Tauranga has run the floor of an engineering business for eight years. The owner is retiring and offers to sell to him. The business has solid financial statements, long-standing customers and loyal staff.
How the purchase might be funded:
- His contribution: some savings, plus equity in his home as security.
- Property-secured loan: covers most of the price and some working capital for the first months.
- Vendor finance: the retiring owner agrees to leave a portion owing, repaid over two years — which also keeps the vendor interested in a smooth handover.
- Conditions: the sale agreement is conditional on finance and due diligence, with a realistic timeframe.
What strengthens his application: eight years of hands-on experience in the business, customer relationships that won’t walk out with the seller, and the seller’s financials and bank statements supplied through the sale agreement.
Red flags in a business for sale
Mr suggests pausing if you see:
- profit that relies on the owner working seventy-hour weeks for nothing;
- one customer providing most of the revenue;
- a premises lease ending soon with no right of renewal;
- financial statements and bank statements that don’t match;
- unpaid IRD debt or overdue returns;
- key staff likely to leave at sale.
Any of these can be negotiated or priced in — but they all affect how a lender sees the deal, and how comfortable you should be borrowing for it.
Ask Mr about funding your purchase
Tell us about the business you’re buying, the price, what you’re contributing and what property could help. There’s no credit check to ask, your plans aren’t shopped around a crowd of lenders, and a real person will tell you what’s realistic before you commit.
Please give the purchase price and settlement date accurately on the form — timing is everything when there’s a finance condition. See if your purchase could be funded.
Frequently asked questions
How much do I need to contribute myself?
It varies with the business, the price and the security available. Lenders like to see buyers with some of their own money in the deal. With enough property equity, the contribution can be largely in the form of security rather than cash.
Can the business I'm buying be the security?
Business assets and goodwill can play a part, but on their own they're usually not enough for a lender. Property security, or the seller agreeing to leave some of the price owing (vendor finance), often fills the gap.
What will the lender want from the seller?
Typically the last two or three years of financial statements, recent management accounts, GST returns and, ideally, business bank statements. Your sale agreement should give you access to them.
Should my offer be conditional on finance?
Yes. A finance condition gives you time to arrange funding and the right to withdraw if you can't. Talk to your lawyer about the wording and the dates.