Buying a business is a major investment decision that can pave the way for financial independence, lifestyle freedom, and long-term wealth. But if you’re exploring this path, you might be wondering: “Do I need a deposit to buy a business?”
The short answer is: Yes, in most cases, you will need a deposit. But how much, why it matters, and whether there are flexible options available depends on several factors.
This article is designed to help first-time entrepreneurs, seasoned investors, and business buyers across Sydney, Melbourne, Brisbane, and surrounding regions better understand what to expect when it comes to deposits and funding options when purchasing a small to medium-sized business.
Why a Deposit Is Typically Required
A deposit is generally required as a show of serious intent. It’s a financial commitment that:
- Demonstrates your genuine interest to the seller
- Helps secure the business during due diligence
- Gives you time to finalise financing and legal checks
Typical deposit amounts range from 5% to 10% of the agreed sale price. For example, if a business is selling for $500,000, a deposit of $25,000 to $50,000 may be expected.
This amount is usually held in trust by the broker or solicitor and deducted from the final purchase price at settlement.
Can You Buy a Business Without a Deposit?
While rare, some business purchases can proceed without a traditional upfront deposit. These scenarios may include:
- Vendor financing, where the seller agrees to partial or full payment over time
- Asset-based lending, where business assets or inventory are used as collateral
- Third-party investors or partners contributing capital
For strategic guidance on funding options, you can explore our article on how to use business loans to expand your business smartly.
Where Can the Deposit Come From?
If you don’t have immediate cash on hand, your deposit may be sourced from:
- Personal savings or redraw from an existing mortgage
- Home equity loans or refinancing options (compare home refinance vs home equity loan)
- SMSF funds, under strict ATO conditions (learn how to leverage your SMSF for investing)
- Private lenders or finance brokers who specialise in small business lending
Working with an experienced business broker or finance expert can help you explore these pathways.
What Happens to the Deposit if the Deal Falls Through?
During the due diligence period, if there are major concerns that cannot be resolved (such as misleading financials or regulatory issues), the deposit is typically refundable—provided terms and conditions are clearly outlined in the sales agreement.
Once the contract becomes unconditional, however, the deposit may become non-refundable if the buyer pulls out for personal reasons.
This underscores the importance of having a clear contract and working closely with professionals during negotiations.
Tips to Strengthen Your Buying Power
- Get pre-approved finance – Know how much you can borrow before making an offer.
- Review your credit score – A strong credit profile can help secure better funding terms. Use our credit score check tool.
- Build a savings buffer – Apart from the deposit, you may also need working capital for operations post-settlement.
- Partner with the right professionals – A knowledgeable business broker or buyer’s advocate can help you assess the business and negotiate terms.
FAQ: Buying a Business Deposit Requirements
Do all business purchases require a deposit?
Most do, but some may offer vendor finance or creative structuring. Always negotiate based on the business type and seller’s flexibility.
How much deposit do I need to buy a business?
Typically between 5% to 10% of the total purchase price.
Can I use borrowed money for the deposit?
Yes, especially through personal loans, equity finance, or refinance solutions. Check our borrowing power calculator to see what you can afford.
What happens to my deposit if I back out of the deal?
If within the due diligence period and contract conditions are met, you can usually recover your deposit. Always seek legal advice.
Can I negotiate the deposit amount?
Yes. Depending on market conditions and seller motivation, some may accept a lower deposit or staggered payment.
Final Thoughts: Get Expert Help Before You Buy
Buying a business is a significant move—whether it’s your first or your fifth. Knowing how much deposit you’ll need, where to source it, and what your options are can make the difference between a seamless acquisition and an uncertain transaction.
If you’re unsure where to begin or need help assessing your options, reach out to the experienced team at The Brokerage Connection. We support business buyers and sellers across Sydney, Melbourne, Brisbane, and regional areas with expert brokering, financing, and strategy.
Explore more about buying a business or contact us today to get started.