Loans to buy a café, shop or salon

Buying an existing café, shop or salon is one of the most common ways people end up on the main street. You get a working business with customers, staff, suppliers and a fit-out from day one. But you’re also paying for something you can’t touch — goodwill — and that shapes how the purchase gets funded.

What are you actually paying for?

Business.govt.nz describes a business as having two parts: goodwill, which reflects the strength of the customer base and reputation, and tangible assets. In a typical café or shop, the tangible assets — equipment, furniture, fit-out — are worth far less than the asking price. The rest is goodwill.

That matters because lenders can lend against assets more easily than against goodwill. It’s why most small business purchases are funded with:

1. Your own deposit, and
2. A property-secured business loan against a home or other property — $20,000 to $5,000,000 — through a first or second mortgage or caveat-style security.

Some buyers with strong experience, a sizeable deposit and a business with excellent, verifiable trading can use unsecured funding — typically $5,000 to $500,000 for trading businesses — for part of the purchase or for working capital after settlement.

What does the full purchase cost?

The price on the listing is only part of it.

Cost	What it covers
Purchase price	Goodwill plus plant and equipment
Stock at valuation	Usually counted and paid for at settlement, on top of the price
Legal fees	Agreement, lease assignment, due diligence
Accounting fees	Checking the books and structuring the purchase
Lease costs	Bond, assignment fees, sometimes a personal guarantee
Licences and registrations	Food registration, alcohol licence where relevant
Working capital	Wages, suppliers and rent while you settle in
Early changes	A refresh, new equipment, new signage

If your budget only covers the price, you’ll start with an empty bank account — the worst way to begin.

What do lenders want to see?

The seller’s real numbers. Business.govt.nz recommends having an accountant examine the books for seasonal trends and the reliability of forecasts, and comparing performance against independent industry data. Lenders will want accounts and bank statements, not just the sales brochure.

The lease. Much of a café’s or shop’s value depends on its location. Check the remaining term, rights of renewal, rent reviews, permitted use and whether the landlord will consent to assignment. Our commercial lease checklist goes through it.

Licences and registrations. A café on a template food control plan registers with its local council, according to MPI. A bar or restaurant serving alcohol needs a valid licence — and Wellington City Council, for example, notes on-licences are renewed one year after first issue and every three years after that. Confirm what transfers and what you’ll need to apply for yourself.

You. Experience in the same kind of business is a big plus. A barista of ten years buying a café is a different proposition from someone who’s never worked in hospitality.

Ready to talk through a purchase? Start an enquiry — there’s no credit check to ask.

How should the deal be structured?

Business.govt.nz suggests the agreement specify the price, payment terms, restraints on the seller competing, staff continuation and a financial due diligence period. From a funding point of view, make sure there’s enough time in the due diligence period to get finance approved — and make the agreement conditional on finance.

Also clarify GST. Business.govt.nz notes that GST on a business sale can be 15% or 0% depending on the circumstances, which can make a big difference to how much cash you need at settlement. Your accountant should confirm this before you sign.

An illustrative example

Illustrative only. A couple with years of hospitality experience agree to buy a suburban café. The price covers goodwill, equipment and the fit-out; stock will be counted at settlement. The lease has four years left plus a right of renewal, and the landlord consents to assignment.

They use savings as a deposit, a property-secured loan against their home for the balance and stock, and arrange a small buffer for the first two months’ wages. They also plan a modest refresh in the quiet winter months once they understand the business. Our guide to buying an existing café shows the checks they ran first.

Which red flags should make you pause?

Not every business for sale is a good buy. Slow down if you see:

• Takings you can’t verify. If bank statements and GST returns don’t support the sales figure, value the business on what you can prove.
• An owner who is the business. If regulars come for the seller, ask how a handover will work and whether they’ll agree to a restraint.
• A short lease with no renewal. You may be paying for goodwill that walks out the door when the lease ends.
• Equipment that isn’t really included. Leased or financed items may not transfer.
• Unpaid tax or supplier debts. Make sure the agreement deals with them and your lawyer checks for registered security interests.
• A sudden reason to sell. A major road project, a new competitor or a landlord’s redevelopment plan can all change the picture.

None of these automatically rules a business out, but each should be reflected in the price and the conditions of the agreement.

Ready to make an offer?

If you’ve found a café, shop, salon or clinic you want to buy, start your 60-second enquiry before you sign. Asking doesn’t touch your credit file, your details stay with one team rather than going to a pile of lenders, and a person will ring to talk through the deal. Accurate numbers — price, deposit, the business’s takings and any property you own — help us find the right fit first time.