Business Acquisition Lending
Funding to buy a business.
Buying an existing business can be one of the fastest ways to grow, but funding a business purchase is different to a standard loan.
Business acquisition lending is primarily based on the strength of the business itself - including its profitability, cashflow and ability to service the debt.
In most cases, funding comes from the main banks, provided the business is stable and the purchase makes sense. Lenders also consider the experience of the buyer, the industry and how the purchase is structured.
At Vive Capital, we help position business purchases for funding and work with banks and other lenders where appropriate to get the transaction through.
How business acquisition finance works
Business acquisition lending is typically based on the cashflow of the business being purchased. Lenders want confidence that the business can generate enough income to cover loan repayments and ongoing operating costs.
Assessing business cashflow
This usually involves reviewing:
Historical financials
EBITDA (Earnings before interest, tax, depreciation and amortisation) or net profit
Add-backs and adjustments
Debt servicing ability
Working capital requirements
Purchase price relative to earnings
Lenders also look closely at how the purchase price compares to earnings, often using an EBITDA multiple.
For example, a business earning $500,000 in EBITDA purchased for $1,500,000 represents a 3x multiple.
Lower multiples are generally lower risk, as the debt can be repaid faster from business cashflow. Higher multiples increase risk and may require more equity or a more structured approach.
If the fundamentals are strong, banks may fund a portion of the purchase price.
Goodwill v tangible assets
The funding structure often depends on how the purchase price is split between goodwill and tangible assets.
Where a business has strong tangible assets, such as plant, equipment or property -
banks are generally more comfortable providing higher lending.
Where the value is largely goodwill, lenders take a more conservative approach. Goodwill relies on ongoing performance, customer retention and management continuity, which increases risk.
This is why two businesses with the same purchase price can have very different funding outcomes.
Deposit requirements
Deposit requirements depend on the strength of the business and how the purchase is structured.
As a general guide, buyers typically need between 30% – 50% of the purchase price as equity.
Higher deposits are more common where:
Goodwill makes up a large portion of the purchase price
Earnings are volatile
Industry risk is higher
Buyer experience is limited
EBITDA multiple is higher
Lower deposits may be possible where:
Cashflow is strong and stable
Tangible assets support the purchase
Additional security is available
Vendor support is included
The purchase price is sensible
Equity contributions can come from:
Cash
Property-backed equity
Vendor finance
What drives funding outcomes
Business acquisition lending is driven by the strength of the business.
A stable business with consistent earnings, a sensible purchase price and a clear transition plan will generally result in better funding outcomes and access to bank funding.
Higher-risk acquisitions or goodwill-heavy purchases may require more equity, additional security or alternative lending structures.
Talk to us early - When to apply for funding/ seek options
It’s best to look at funding early in the process. This helps you understand borrowing capacity and structure the acquisition correctly.
We can help when you are:
Assessing a business opportunity
Negotiating a purchase
Reviewing financials
Structuring a buy-in
Preparing an offer
Acquiring a competitor
Planning a management buyout
Early planning often creates more funding options.
Discuss your project
If you're considering buying a business, we can help you understand how the funding may be structured and what lenders are likely to look for.
Common questions about buying a business
How much can I borrow to buy a business?
Borrowing capacity depends on the strength of the business.
Lenders assess:
Cashflow and profitability
Purchase price relative to earnings
Level of equity contributed
Buyer experience and background
As a guide, most transactions are structured with 30% to 50% equity, with stronger businesses requiring less and higher-risk purchases requiring more.
Can I get a loan to buy a business in NZ?
Yes - most business acquisitions in New Zealand are funded through bank lending.
If the business has stable earnings, a sensible purchase price and can service the debt, banks will often provide funding.
Where the deal doesn’t fit standard bank criteria, alternative lending options may be considered.
What do lenders look at when financing a business purchase?
Lenders focus on the business rather than just the borrower.
Key areas include:
Cashflow and profitability
Ability to service the debt
Purchase price relative to earnings (EBITDA multiple)
Industry risk
Buyer experience
How the purchase is structured
The main question is whether the business can repay the loan from its own income.
Do I need experience to buy a business?
Not always, but it can make a difference.
If you’re a first-time buyer, lenders place more weight on:
The strength of the business
The support around you (accountants, managers, advisors)
Transition support from the current owner
A strong business can still be funded without prior ownership experience.
What is an EBITDA multiple in business acquisition lending?
An EBITDA multiple compares the purchase price of a business to its annual earnings.
For example:
$500,000 EBITDA
$1,500,000 purchase price
= 3x EBITDA multiple
Lower multiples are generally lower risk, as the debt can be repaid faster from business cashflow. Higher multiples increase risk and typically require more equity.
Can I use property equity to buy a business?
Yes - property equity is commonly used as part of the deposit.
This can reduce the amount of cash required and strengthen the overall lending position. Lenders are generally more comfortable where additional security is available.
What is goodwill in a business purchase?
Goodwill is the portion of the purchase price that isn’t tied to physical assets.
This includes:
Brand
Customer base
Systems and processes
Future earning potential
Goodwill-heavy businesses are generally seen as higher risk, which often results in higher equity requirements.
How long does it take to get business acquisition funding approved?
Timing depends on how prepared the application is.
As a guide:
Straightforward deals: 2–4 weeks
More complex transactions: longer
Having financials, forecasts and a clear structure ready can significantly speed up the process.
When should I speak to a broker about buying a business?
As early as possible.
Ideally before:
Making an offer
Signing a conditional agreement
Committing to a purchase
Early advice helps you understand borrowing capacity and structure the purchase correctly.
How long are business acquisition loans for?
Business acquisition loans are typically structured over 3 to 7 years, depending on the strength of the business and how the purchase is structured.
Shorter terms are common where the loan is being repaid from business cashflow. Longer terms may be available where additional security is provided.