NZ Business Loans

There are thousands of businesses – big and small – doing amazing things all around New Zealand. If you’re a business owner, you’ll know how liberating and profitable it can be to bid farewell to the rat race and start doing things on your own terms.

Whether you’re just starting out in business, expanding, or going through a quiet patch, a NZ business loan could help you take your company to new heights.

We’ve rounded up a range of options to suit New Zealanders looking for a boost to their business – check out our comparison of NZ business loans below. What to look for? Well that all depends on how much you need to borrow, how long you need to pay it off, and where you can get the best interest rate and loan conditions.

Compinero is committed to helping kiwi businesses prosper. We bring you everything you need to make the best loan decisions for you and your business.

NZ Business Loans

Small businesses make up more than 97% of all businesses in New Zealand. There’s a whole lot of entrepreneurial spirit in Aotearoa, and plenty of room for more!

Getting a business off the ground can make finances tight, and sometimes trying to expand without a little cash injection can seem almost impossible.

Luckily, a number of lenders offer business loans to help small and medium-sized businesses get off the ground and start growing.

We’ve put together this guide to help you navigate the New Zealand business loan scene, so you can put less time into the loan hunt and more time into your application – and growing your business!

What Are Business Loans?

A business loan gives you access to finance when you decide to purchase a business, expand, or make upgrades to your equipment or manufacturing premises. A business loan will either help you start a new business, buy an existing business, or make improvements to your current business that will help it grow.

The amount you can borrow varies widely depending on your individual circumstances, your chosen lender’s belief in your business plan, and whether or not the loan will be secured or unsecured.

There are two main types of business loans in New Zealand: Term Loans and Lines of Credit.

What are Term Loans?

Just like a personal loan or mortgage, a term loan is a lump sum payment given to you by your chosen lender, which you will then need to pay off over an agreed period.

There are different types of term loans available to you and your business, depending on your requirements:

  • A fixed interest rate term loan involves locking in one interest rate for the entire duration of the loan. Beware though – you may be charged an early repayment fee if you pay the loan back before the fixed term has ended.
  • A floating interest rate term loan will see your repayments go up or down as interest rates fluctuate. If the rate goes up, you’ll have to pay more in repayments. But if it goes down, you’ll find yourself paying off your loan faster – or you can even reduce your payments and enjoy the extra breathing space.

Term loans also vary when it comes to security:

  • A secured business loan (using a valuable asset as a guarantee) will often allow you to borrow more money, and make it more palatable to lenders to enter into a loan contract with you. The risk here is that if you fail to make your repayments, lenders are well within their rights to take your asset or assets to recoup their losses.
  • An unsecured business loan means less risk to you, but you may find interest rates and fees are much higher. You probably won’t be able to borrow as much with an unsecured business loan as you would be able to with a secured one.

Term loans can be an excellent choice of business loan thanks to their relatively low interest rates and larger loan amounts. Term loans are often easier for established businesses to secure – lenders prefer to see signs of business success before choosing to lend a large sum.

What is a Business Line of Credit?

Credit cards and overdrafts are a common example of a line of credit loan – a pool of money available to you as you need it, and which you can dip in and out of indefinitely. Unlike a term loan, a line of credit does not typically involve a set date to repay the balance of the loan, and you’ll only pay interest on the part of the loan that you actually use.

If you take out a $10,000 term loan, for example, you’ll immediately be paying interest on all $10,000 of that loan – even if you haven’t used any of it yet. With a line of credit, you may have $10,000 available to you, but you’ll only pay interest when you start using that credit, and then only on the amount you’ve actually used.

Penalty fees and interest rates can be high with a line of credit, especially if you miss a repayment.

Business Credit Cards

A business credit card is a line of credit you can carry with you in your pocket. It allows you to make purchases for your business while on the go. It’s also a good way of paying for business expenses online without confusing your personal and business accounts with expenses charged to your personal credit card.

Business credit cards do have their downsides. They typically attract higher fees and interest rates than regular lines of credit, and offer lower credit limits.

On the plus side, you can often benefit from reward programmes, extended warranty insurance on some purchases, and depending on the card provider, may even be able to enjoy interest free periods on purchases.

Business Overdrafts

Just like a personal overdraft, a business overdraft lets you dip into negative on your business bank account, so you can cover gaps in supply and payment when things get tight. 

You can agree an overdraft limit with your chosen lender, and once it’s approved, you’ll be able to use the negative balance as you need it. 

Interest on business overdrafts is typically calculated daily and charged monthly on the amount of the overdraft you have used during the month. Just like a credit card, you only pay interest on the money you actually use, and you can pay off the overdraft and re-use it anytime you want. 

How to Apply for a NZ Business Loan

Getting a business loan in New Zealand is not quite as straightforward as getting a personal loan or credit card. Rather than simply taking into account your income and financials, a business loan lender will want to see evidence of your business plan, financials supporting any claims of an existing business’s successes, and a number of other factors including: 

  • Your personal credit history and existing loans
  • Your business accounts showing profit and loss, balance sheets and cash flow statements
  • Whether or not you have debtors
  • Your ability to repay the loan and cover interest costs
  • Financial forecasts and information about new clients/customers and possible events or changes for the business
  • Future budgets
  • Up-to-date accounts - if you don’t show accounts for the past couple of months your lender will want to know why.

​What to Look for When Comparing NZ Business Loans

Deciding on a business loan is just like making any other kind of business decision: you want to get the best deal for you and your company.

These are some of the key factors to consider before approaching a business loan lender – by bearing them in mind, you could save yourself thousands!

Which Business Loan has the Lowest Interest Rate?

No matter what type of loan you’re looking for, interest rates should always be your first port of call. Depending on the interest rate your lender is charging, your business could find itself with a loan paid off within a year, or still chipping away ten years down the track.

Business interest rates vary considerably depending on both the lender and your business. A very profitable company would be able to organise a business loan for interest rates as low as 5 to 10%. On the other hand a new business just starting out could be looking at 15 to 20% or even more. 

Banks typically charge interest based on a risk assessment of your business. 

Which Business Loan has the Best Perks?

Often business loans (and in particular business credit cards) offer rewards that can make them worth the debt. When shopping around for a business loan, make sure you consider this aspect of the deal - if you’re going to score yourself free business flights thanks to your business credit card’s Airpoints scheme, you might save yourself hundreds of dollars throughout the year. 

From Westpac’s Airpoints and Hotpoints to BNZ’s Flybuys and Cash Rewards and ASB’s True Rewards or AASmartFuel, making the most of your business credit is key. 

Which Business Loan has the Best Turnaround time?

With business, time is all-important. If you need money to take advantage of a new business opportunity, you want to know you can get it as fast as possible. That’s why loan turnaround time is one of the most important things to check for when researching business loan lenders. After your loan is approved most banks will be able to get the cash to you well within a week, but if you need the money sooner rather than later it pays to make a point of asking before you get too far into the application. 

What Alternatives Are There to Business Loans in New Zealand?

If you’re looking for an alternative to a NZ business loan, targeted use of finance may help you pay for big or recurring expenses and free up money for other areas of your business. 

Using a credit card or finance company to pay for equipment, furniture, and technologies like security systems and Eftpos terminals can help you avoid a bigger loan while getting you the business equipment you need without delay. 

Companies like Q Card or Gem Visa offer 0% interest on some purchases and have minimal fees. 

Finally, if you’re a start up business and don’t think you’ll have much luck with a traditional business loan, try asking friends and family to invest in your idea - you never know, they might be more interested than you think.

Conclusion

In the immortal words of Flight of the Conchords: It’s business time! 

Nobody ever said starting a business was easy, but it can certainly be pretty tough at times. When you’re needing a little financial boost to take your company to new heights, a business loan can be a huge help. 

Whether you’re needing a small business loan, a line of credit for an existing company, or a bigger term loan to buy an existing business, using the comparisons at the top of this page will have you clued up on the best deals in no time. 

FAQs

How Much Can I Borrow With a NZ Business Loan?

The amount you can borrow for your business depends a lot on whether or not it is an established business, what its profits have been to date, and your chosen lender’s belief in your business plan. Generally-speaking, though, you might be able to get an unsecured loan as high as $75,000 and even for small businesses a $200,000 secured loan is commonplace. 

What NZ Banks Offer Business Loans?

All the major New Zealand banks offer business loans. Take a look at the comparisons above and find the business loan that suits your situation.

Which NZ Bank Has the Lowest Interest Rate on Business Loans?

Interest rates vary, but our comparisons will always bring you the latest information on low-rate business loans. 

Am I Eligible to get a Business Loan?

Each lender may have different requirements for demonstrating your eligibility, but generally-speaking you will need to provide: 

  • Details about how much you take as a salary or wage from the business, or, if a new business, how much of a wage you plan to take
  • A Personal Statement of Financial Position - this lays out all the lender needs to know about your existing debts and assets
  • A business plan that demonstrates why the loan is required
  • Your forecasted cash flow for the next quarter
  • If you are applying for a secured loan, you will need to show evidence of the security (asset) you plan to offer
  • Information about the ownership and operational structure of the business
  • IRD returns showing your income
  • Your bank may also want you to seek independent advice from a financial advisor, accountant or lawyer before taking out a business loan.