Finance question
How much deposit do I need to buy a business?
It depends on the business, but a deposit of roughly 20 to 50% of the valued price, plus costs, covers most of the purchases in our guides. Trades businesses sit at the low end, while leaseholds and pubs without gaming sit at or above the high end. The loan is sized off the lender's valuation, not your contract price, so any premium over valuation is yours to fund.
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The short answer
The deposit follows what the lender could sell
A lender sets the deposit by asking what it could recover if the business failed. Where land and buildings are part of the sale, there is something to sell, so the deposit is smaller. Where you are buying mostly goodwill, there is not, so the deposit is larger. The loan is also sized off the lender's valuation, not your contract price, which means paying above valuation leaves you funding the whole gap. Costs such as legal work, due diligence and working capital come on top of every figure below.
Where property is part of the sale, the numbers are published. Freehold caravan parks indicatively fund at around 70% of the going concern valuation, so plan roughly a 30% deposit plus costs, while leaseholds need around half (caravan park guide). Freehold motels lend at 50 to 70% of valuation, so plan a 30 to 45% deposit (motel guide). Pubs run around 65% where gaming is in place and around half without it, a 35 to 50% deposit (pub guide).
Service businesses with no property behind them sit lower in the lending range. In trades, deposits run 20 to 30% and banks rarely fund more than 50 to 70% of goodwill (trades business guide). A staffed commercial cleaner at $260,000 to $1.1 million is usually funded with a buyer deposit of 30 to 50% (cleaning business guide). Franchisors set their own floor: Guzman y Gomez asks for 40% in liquid assets, and McDonald's publishes a 70% borrowing cap against agreed valuation (franchise guide). Ventas is a broker across 40+ lenders, with no upfront fee to you.
Do you qualify?
What sets the size of your deposit.
Property in the sale
Freehold land and buildings usually bring the deposit down.
The type of business
Trades, salons, motels and pubs each carry their own lending range.
The lender's valuation
The valuation sets the loan, and any premium over it is yours.
Costs on top
Legal fees, due diligence and working capital sit outside the deposit.
Why deposits differ so widely
Security decides it
Land and buildings can be sold, goodwill cannot, so goodwill deals need more cash.
Valuation, not price
Pay above the valuation and the gap comes from you, not the loan.
Equity can count
Equity in a home or investment property can cover part of the deposit.
A worked example
A buyer pays $2.4 million for a regional freehold pub going concern with gaming in place, valued at the same figure. At around 65% the lender advances about $1.56 million, leaving roughly $840,000 plus costs. The buyer puts in $300,000 of savings and covers $540,000 with equity in an investment property. Without gaming, lending drops to around half and the same pub needs $1.2 million down. Illustrative only.
Common questions
Frequently asked questions
Is the deposit based on the price or the valuation?
The lender's valuation. The loan is a share of what its valuer says the business is worth, so if you agree to pay more than that, the difference comes from you on top of the deposit.
Does a leasehold need a bigger deposit than a freehold?
Usually yes. Leasehold caravan parks and motels need around half down, against roughly 30% plus costs for a freehold caravan park, because the lender is funding goodwill rather than land and buildings.
Can the deposit come from equity in my home?
Often yes. Equity in a home or investment property can be offered as additional security and may cover part or all of the gap, subject to lender assessment. The amount is sized to the equity left after existing loans.
What costs sit on top of the deposit?
Stamp duty where it applies, legal and accounting due diligence, any valuation the lender orders, and working capital to run the business from day one. Budget for these separately from the deposit.