How To Get A Business Loan In New Zealand

We had a great question come through from the audience recently, someone wanting insight into getting finance for their business.

We don't know exactly what stage of business they're at or what they want the money for, but Phil and I thought we'd go a bit wider than just answering their specific situation and give some real insight into the different ways people go about funding their business.

Brace yourself, it's a punishing process
If there's one thing I want you to take away from this, it's that getting debt when you're in business is an extremely punishing process. 

If you think you need debt in your business, you need to sort it well ahead of when you'll actually need it.

Say you can see over the holiday period that you'll need to pay out annual leave, or there's a closedown coming and you'll still need to cover insurance, rates and your accountant, and you might need a bit of an overdraft, don't leave that until December.

Don't even leave it until November.

You'll probably need to start now, because in our experience, bankers aren't the fastest-paced employees.

There are exceptions, sure, but generally it can take a good chunk of time.

A real world example: borrowing $700,000
Earlier this year I heard about a business owner who wanted to borrow $700,000 and they got the finance very quickly from a major bank.

Here's roughly how they did it.

They had a conversation with the bank first, told them the story, explained why they wanted the money and what they were going to do with it, basically sold the bank on the vision.

The banker then said, "Okay, show us your current numbers."

The business owner went straight back to their desk, pulled their year-to-date report, and gave that to the banker.

Then they went away and forecast what things could look like if they got the loan, even asking the banker for likely terms and interest rates to feed into their projections.

Within a week, they'd given the bank a forecast plus a written story explaining why the numbers stacked up, what could go wrong, how they'd been conservative, and how they'd modelled the loan repayments.

And they had $700k in their account.

Now that doesn't happen for everyone, but it shows what being properly prepared looks like.

You've got to sell the bank on why they should lend to you, back it up financially and non-financially, and prove you can actually repay it.

What the bank needs to see
You need reliable numbers in your business, a profit and loss and a balance sheet you can run off your accounting system.

Lenders look at historic financial information, and if you're running personal costs through the business to avoid paying tax while trying to minimise your profit, don't be surprised when the bank looks at that and decides not to lend.

Run your business as if someone's looking at it for a future sale. Being profitable and paying tax is a good thing, it makes it far easier to get lending.

Then in the forecast, you need to show what you'll do with the money.

There's no point going through all this process if the numbers don't stack up.

Smaller amounts — $5,000 to $10,000
For smaller amounts, I think people get stuck overthinking it.

Do you really need to build a full forecast and sell a story for five or ten grand?

Because the money might not need to come from a bank.

Family is a completely legitimate option here, and I don't think people should be embarrassed to ask. Ironically, I see people who don't even have a business yet asking family for money to get started, and they're not ashamed of it but people already in business can feel like admitting they need family funds means they're not good at business.

I don't think that's true at all.

If you do go down this path, treat it with the same seriousness as approaching a bank, explain what you want the money for, what the numbers look like, and how long it'll take you to pay it back.

Other Practical ways to find $5,000 to $10,000
• Do an actual brainstorm (pen and paper, or ask AI to help).

• Consider your own assets sitting around the house, Trade Me data suggests the average person has around $1,400 worth of unused gym gear alone sitting in their garage, so you're well on your way to five grand already.

• Ask your existing network or social media audience directly. And remember: your suppliers can also be a form of funding.

We had a client wanting to buy a $50,000 piece of equipment to hire out, instead of trying to find $50k from nowhere, they simply asked the supplier if they could pay it off over six months.

The supplier agreed. That turned an impossible problem into a manageable one, and gave the business owner a clear runway to get the equipment earning before the payments were due.

The three C's of credit
Credit teams (the mysterious people banks consult before final sign-off) generally assess three things:

1) Character: your trustworthiness and willingness to repay, based on things like your credit history and whether you pay bills on time.

2) Capacity: your ability to make repayments, based on income, business stability, and existing debt-to-income ratio. Basically: is there enough cash flow left over to handle a new loan?

3) Capital or collateral: the assets you own (savings, investments) or can pledge as security, like a vehicle or a house. If your character or capacity falls short, the lender at least has security they can sell to recover their money.

Don't let "I can't get finance" become an excuse
There's a real difference between genuinely not being able to access finance and using that as a reason not to take action.

If you can't get finance, you still need to go and do the thing, get creative, sell your idea, build a waitlist of people who want what you're offering before you even have it, then go back to that lender with proof rather than just a hope.

That's a far stronger position than saying "if only I had the money, I'd do all this marketing and make heaps of sales."

And on the flip side, if you're already an established business, once you do access debt, stick to the plan.

If you borrowed to fund a marketing campaign or buy stock, don't let that cash sitting in the account tempt you into a different decision.

Straying from the plan is how businesses get themselves into trouble.

A few other options worth knowing about
1) Tax as a lever: you can put tax on finance, or use tax pooling to manage payment timing (not advocating for not paying it, just noting it as a lever some businesses use).

2) Overdrafts: don't assume they're impossible to get, ask the bank and you might be surprised. Presenting your situation and personal balance sheet properly might open up more options than you think.

3) Term loans: different to an overdraft, paid off over an agreed term.

4) Borrowing against your house: if you've got equity, banks will often lend against it for business purposes, check with your accountant, but the interest may be deductible if the funds are genuinely being used to drive business activity.

5) Asset and car finance: most of our clients who buy a large asset or vehicle sort the finance themselves before even mentioning it to us.

If you believe in your business and you're using the money to get ahead, it will pay for itself, but only if you go in prepared, know your numbers, and are willing to ask the question.

Don't assume the door's closed just because you haven't knocked on it yet.

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This article is based on insights from the Next Advisory podcast, where Luke and Phil help New Zealand business owners navigate economic challenges and build better businesses. Visit nextadvisory.nz to find out how we can help you.

Checkout more of our blog content at https://nextadvisory.nz/podcast