Business Loans
Finding the right business loan isn't just about finding a lender
Need money for your business?
There are plenty of lenders offering business loans in New Zealand. The harder part can be working out which type of finance you need and which lenders are likely to consider your application.
Different lenders have different criteria. Some focus heavily on business turnover and cashflow. Some will lend against property. Others will consider vehicles, machinery and equipment you already own. Some specialise in particular types of lending or are prepared to consider circumstances that don't fit within traditional bank lending criteria.
That's where a business finance broker can help.
NZ Business Finance works with a range of bank and non-bank business lenders. We look at your business, why you need the money and what options are available before deciding which lenders are worth approaching.
What can I use a business loan for?
Business loans can be used for a wide range of legitimate business purposes, including:
Working capital
Managing cashflow
Paying suppliers
Buying stock or materials
GST, PAYE and other tax obligations
Marketing
Business expansion
Opening another location
Repairs or renovations
Refinancing or consolidating existing business debt
Buying a business or franchise
Other business expenses
The purpose matters because it can influence both the type of finance that's appropriate and which lenders are likely to consider the application.
For example, a business needing $50,000 to manage a temporary cashflow shortage is a very different lending proposition from someone borrowing $500,000 to purchase another business.
What type of business loan do I need?
There isn't one type of "business loan".
Here are some of the options we work with.
Unsecured business loans
An unsecured business loan doesn't rely on a particular property, vehicle or piece of equipment as security.
These loans can be useful for established businesses needing funding for working capital, cashflow, growth, stock, marketing, refinancing or other business purposes.
Lenders generally place significant emphasis on the performance of the business, including turnover, cashflow, existing debt and bank account conduct.
Secured business loans
If your business owns vehicles, machinery, equipment or other assets with sufficient resale value, you may be able to use those assets as security for a loan.
This can include individual assets or, with some lenders, the collective value of a group of business chattels.
The assets need to have genuine value and a reasonable resale market. The lender will generally register its security interest on the Personal Property Securities Register (PPSR).
Second mortgages for business
If you own residential or commercial property with available equity, a second mortgage can provide business funding without refinancing your existing first mortgage.
These are commonly used when a bank has declined additional lending but there is sufficient equity in the property for a second-tier lender to consider the application.
Second mortgages are generally short-term funding and may offer options such as interest-only repayments or capitalised interest. They can provide breathing space for a business to improve its financial position before refinancing back to lower-cost lending.
Business and franchise purchase loans
Financing the purchase of a business can be difficult through traditional bank lending, particularly when a significant part of the purchase price relates to goodwill.
Some second-tier lenders will consider the strength and financial performance of the business being purchased, the buyer's contribution and their relevant industry experience.
Funding may also take into account working capital required after the purchase.
Invoice finance
If your problem is that too much of your money is sitting in unpaid customer invoices, taking out another conventional loan may not be the best answer.
Invoice finance allows eligible businesses to access some of the value of invoices before customers actually pay them.
It can be particularly useful for businesses that sell to other businesses on 30, 45 or 60-day payment terms and need working capital in the meantime.
Secured or unsecured business loan?
This is one of the first distinctions worth understanding.
With a secured business loan, the lender has security over particular assets or property.
With an unsecured business loan, the lender isn't relying on a particular asset as security for the loan, although personal guarantees and other security documentation may still be required.
Neither is automatically better.
If you have suitable security available, a secured loan may provide access to lending that wouldn't otherwise be available. But it also means putting those assets at risk if the loan isn't repaid.
If your business has strong cashflow and meets a lender's criteria, unsecured finance may be more appropriate.
Sometimes we'll discuss both possibilities before deciding which makes more sense.
How much can my business borrow?
There isn't a standard answer.
Two businesses with exactly the same turnover could qualify for very different amounts.
Lenders can consider factors such as:
How long the business has been trading
Revenue
Profitability
Cashflow
Existing business debt
Current loan repayments
Bank account conduct
Industry
Credit history
Tax position
Available security
Why the money is required
The proposed loan term
Most importantly, the lender needs to be comfortable that the business can afford to repay the proposed lending.
Security can strengthen an application, but having an asset worth more than the amount you want to borrow doesn't automatically mean the loan will be approved.
What will a business lender want to see?
That depends partly on the amount you're borrowing and the type of loan.
For a relatively small unsecured loan, some lenders can assess an application primarily from recent business bank statements and basic business information.
For larger or more complex lending, expect the lender to want considerably more information.
That might include:
Business bank statements
Financial statements
Current management accounts
Details of existing debt
Information about your tax position
Details of assets or property being offered as security
Financial forecasts
A business plan
Information supporting the purpose of the loan
If you're buying a business, the lender may also want financial information about the business you're purchasing, a draft sale and purchase agreement and evidence of your own contribution.
The documentation isn't identical across lenders, which is another reason choosing the lender before preparing an application can save time.
What if I owe money to the IRD?
Having GST, PAYE or other tax arrears doesn't necessarily prevent a business from obtaining finance.
Some lenders will consider applications where money is owed to the IRD, and business finance is sometimes used to clear or manage tax debt.
The lender will want to understand how the arrears arose, the amount owing, whether an arrangement is already in place and whether the underlying business can support the proposed lending.
If tax debt is part of the reason you need finance, tell us about it from the beginning. It is much easier to identify appropriate lenders when we understand the complete picture.
What if my business has bad credit?
It depends on what "bad credit" actually means.
A historical credit problem isn't necessarily treated the same way as recent defaults, unpaid debts or continuing problems with cashflow.
Different lenders also have different credit criteria.
Rather than assuming you either will or won't qualify because of a credit score, we need to understand what happened, when it happened and what the business's position looks like now.
Security can sometimes create additional lending options, but it doesn't automatically overcome serious credit or affordability problems.
Can I get a business loan if my bank has said no?
Potentially … that’s why you’re here, right?
A bank decline doesn't necessarily mean your business can't obtain finance.
Banks and non-bank lenders have different credit policies, security requirements and appetites for risk.
A second-tier lender may be prepared to consider an application that doesn't fit a bank's criteria, particularly where there is a strong underlying business, suitable security or a clear reason why the funding will improve the business's position.
But a non-bank lender isn't simply a lender that says yes when the bank says no.
The application still needs to make sense.
The key is understanding why the bank declined the application and whether another lender assesses that particular risk differently.
How much does a business loan cost?
Business loan interest rates vary considerably.
The rate you're offered can depend on the lender, loan type, amount, term, business performance, available security and the lender's assessment of risk.
There may also be establishment, documentation, legal, valuation or other fees depending on the type of finance.
That means the lowest advertised interest rate doesn't necessarily tell you which loan will cost less — or which lender is actually appropriate for your business.
It's important to understand the total cost and structure of the finance, including how and when it needs to be repaid.
How long can I get a business loan for?
Again, it depends on the type of lending.
Some business loans are designed to be repaid over several years. Other forms of finance, particularly some secured and property-backed lending, are deliberately short term.
The right term needs to make sense for the reason you're borrowing.
Borrowing money to manage a short-term cashflow gap is different from financing a business purchase that needs several years to repay.
The repayment structure also matters. Depending on the product, repayments may be principal and interest, interest-only, or in some circumstances interest may be capitalised for an agreed period.
Why do different lenders give different answers?
Because lenders don't all assess business loans in the same way.
Each lender has its own credit policy and appetite for particular types of lending.
One lender might be comfortable with your industry while another isn't. One might place significant weight on property ownership. Another might focus more heavily on business cashflow.
They can also differ in how they treat:
Existing debt
Credit history
IRD arrears
Personal borrowing
Business age
Particular industries
Property
Vehicles and machinery
Goodwill
Loan purpose
This is why a decline from one lender doesn't necessarily tell you what another lender will do.
It's also why applying indiscriminately to multiple lenders isn't necessarily the best approach.
Why use a business finance broker?
You could approach lenders yourself.
The difficulty is knowing which ones to approach.
Business lending criteria aren't always obvious from lenders' websites. And an application that makes perfect sense to one lender may fall outside another lender's policy.
Our job is to understand what you're trying to achieve, look at the financial position of the business and identify lenders whose criteria are more likely to fit.
Sometimes the answer is an unsecured loan.
Sometimes it's finance secured against assets or property.
Sometimes invoice finance makes more sense than taking on another conventional loan.
And occasionally the right answer is that borrowing more money isn't going to solve the underlying problem.
The aim isn't simply to find a business loan.
It's to find a finance structure that makes sense for the business.
Frequently asked questions about business loans
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Business loans can be used for many legitimate business purposes, including working capital, cashflow, stock, suppliers, tax obligations, growth, renovations, refinancing and purchasing another business or franchise. The purpose of the loan can influence which lenders and types of finance are suitable.
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There is no standard borrowing limit. The amount available depends on factors such as business revenue, cashflow, profitability, existing debt, credit history, available security, loan purpose and the lender's criteria.
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No. Some business loans can be obtained without property security. Depending on the application, lenders may consider business cashflow or take security over vehicles, machinery or other business assets instead.
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Potentially. Non-bank and second-tier lenders have different lending criteria from banks and may consider applications that fall outside bank policy. Approval still depends on the circumstances of the business and its ability to support the proposed lending.
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Potentially. Some lenders will consider businesses with GST, PAYE or other tax arrears. They will generally want to understand the amount owing, why the debt arose and whether the business can afford the proposed finance.
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Possibly. It depends on the nature and age of the credit issues, the current position of the business and the lender's criteria. Different lenders take different approaches to previous credit problems.
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A secured business loan uses property or business assets as security. An unsecured business loan doesn't rely on a particular asset as security, although guarantees or other security documentation may still be required.
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Requirements vary. You may need business bank statements, financial statements, management accounts, details of existing debt, information about your tax position and evidence supporting the purpose of the loan. Larger or more complex applications generally require more information.
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It depends on the loan and lender. Straightforward applications can be assessed relatively quickly, while larger or more complex loans involving property, business purchases, valuations or detailed financial assessment generally take longer.
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Not necessarily. Different lenders have different criteria, so it can be more effective to understand your application first and approach lenders that are appropriate for your circumstances rather than making multiple applications without knowing whether they fit.