Top 5 Small Business Finance Options in New Zealand

Introduction

Small businesses are an essential part of the New Zealand economy. However, they face significant challenges in terms of financial stability. One major hurdle is the availability of financing options. Typically, small businesses face higher borrowing costs than larger companies due to their size and limited financial history. In this blog article, we will explore the top five small business finance options in New Zealand. These options can provide much-needed capital to help SMEs expand, grow, and manage their finances better.

Factoring

Factoring is a viable financing option for small businesses in New Zealand. It involves selling your accounts receivable to a third-party company. In turn, the factoring company will pay you an advance of up to 90% of the invoice value. The remaining 10% will be paid once your customer settles the invoice. Factoring is an excellent option for businesses that require immediate cash flow but don’t qualify for traditional bank loans. It is also an excellent way to offload the burden of debt collection to a factoring company.

Invoice Financing

Invoice financing is another financing option that can help SMEs in New Zealand. It involves using accounts receivable to secure short-term funding. The financing company pays the business up to 80% of the invoice value upfront, with the remaining amount paid once the invoice is paid by the customer. Invoice financing is an excellent option for businesses that need short-term financing to pay suppliers or wages. It’s also a good option for businesses that have recurring cash flow problems due to late payment by customers.

Business Credit Cards

Business credit cards can help small businesses manage their finances better. They provide access to a revolving line of credit, which businesses can use to purchase inventory or pay bills. Business credit cards offer many benefits, such as cashback rewards, travel miles, and discounts on purchases. They also provide businesses with a means to build credit history and establish relationships with banks. However, businesses must use credit cards responsibly and ensure they pay off their balances in full each month to avoid high-interest rates and penalties.

Crowdfunding

Crowdfunding is becoming an increasingly popular financing option for small businesses in New Zealand. It involves soliciting funds from a large group of people, typically via an online platform. Crowdfunding is an excellent way for SMEs to raise capital without incurring high interest rates or giving up equity. It also provides businesses with exposure to potential customers while generating buzz about their products or services. Crowdfunding, however, requires significant marketing efforts to attract potential donors and a unique and appealing product or service.

Microloans

Finally, microloans are a popular financing option for small businesses in New Zealand. Microloans provide small businesses with access to relatively modest amounts of capital, typically less than $50,000. Microloans are distinct from traditional bank loans in that they are often provided by non-profit organizations or government agencies. They are specifically designed to help women, minorities, and other underserved communities start and grow small businesses. Microloans can help small businesses overcome financial barriers and support community development.

Conclusion

Small businesses in New Zealand are critical to the country’s economy. However, they face numerous financial challenges. This blog article outlined the top five small business finance options in New Zealand. Factoring, invoice financing, business credit cards, crowdfunding, and microloans all provide SMEs with much-needed financial support. SMEs should explore these options and select those that best suit their needs. By doing so, they can overcome financial hurdles, improve cash flow, and grow their businesses.