If you're weighing up buying an existing business instead of starting one from scratch, the first question is usually the same: how much cash do I actually need up front?
The honest answer is - it depends. But there's a rough range most buyers can plan around.
The typical range: 30% - 50% of the purchase price
In New Zealand, most banks will lend somewhere between 50% and 70% of a business's purchase price - which means you're typically covering the remaining 30% - 50% yourself.
Lower end (30–35%): Businesses with strong, stable cashflow, solid financial records, and tangible assets (equipment, stock, property) the lender can secure against.
Higher end (40–50%): Businesses that are more "goodwill heavy" - meaning most of the value sits in reputation, customer relationships, or brand rather than physical assets. With less for the lender to fall back on, they'll ask you to carry more of the risk.
Where your deposit comes from
It doesn't all have to be cash sitting in the bank. Buyers commonly fund their deposit through:
Home equity - the most common source for first-time buyers
Savings
Equity partners - bringing in someone else's capital to fund part of the deposit. This is different to the other sources though, since it means giving up part ownership of the business, not just funding it
A combination of the above
Separately, vendor finance - where the seller agrees to be paid part of the price over time - can reduce the size of the loan you need, but it isn't part of your deposit. Lenders still want to see your own cash or equity contribution on top of it.
Why lenders care so much about this number
At its core, it's about protecting their risk:
Your deposit is their cushion. If the business underperforms or its value drops, your equity absorbs the first loss - not their loan.
Less hard assets, more equity required. If the business is asset-heavy (equipment, property, stock), the lender has something to secure and sell if things go wrong, so they'll lend more. If the value is mostly goodwill, there's little to recover, so they ask you to carry more of the risk instead.
It shows real commitment. A meaningful deposit means you've got genuine skin in the game - and are far less likely to walk away if things get tough.
Don't put every dollar into the deposit
It's tempting to stretch every available dollar toward the purchase price, but the deposit isn't the only cost. On top of it, you'll need funds set aside for:
Due diligence costs - accountant and lawyer fees to properly check the business before you commit
Working capital - cash to keep the business running smoothly in the first few months post-settlement
Unexpected costs - anything from stock top-ups to equipment repairs that weren't obvious until you were inside the business
A buyer who puts every last dollar into the deposit and has nothing left over is often in a weaker position than one with a slightly smaller deposit and a genuine buffer behind them.
Final remarks
If you're exploring buying a business, a good starting rule of thumb is to have 30%-50% of the purchase price ready to deploy, with a clear picture of where that money is coming from. From there, the right lender and deal structure can usually make the rest work.