The Best Small Business Loans - November 2024 - The Definitive New Zealand Guide

Our guide covers the different types of small business loans available throughout New Zealand, the eligibility requirements and application process, tips on how to successfully secure a loan, the pros, cons and risks of taking of taking on debt, must-know facts and frequently asked questions.

Updated 25 November 2024

Summary:

With high interest rates and the high cost of living putting severe pressure on the New Zealand economy, many small businesses are hanging in limbo, uncertain how stable domestic demand will be in the coming years.
In the short term, thousands of New Zealand small businesses are considering loans and financing options to keep the lights on and ride out the tough few years to come. We've seen a tremendous increase in search volume in 'business loan' related terms since mid 2022.
To help explain what the options are, we've published this guide to make sense of what is, for many business owners, unfamiliar territory.
Know This: Small business loans have unique risks but they are a proven option specifically designed for small business owners to help them fund operational needs, expand into new products or alleviate short-term cash flow issues. What is right for your business takes careful research and your options and understanding the terms and conditions of the loan, you can find the financing solution that best meets the needs of your small business.

Our guide covers:

Useful resources:

Do you want to apply for a loan? Our business loan comparison has the latest offers.
Are you looking for alternatives to business loans? Our guides to finance leases and operating leases explain your options. Our guide to business borrowing options further explains all the options, including government grants, crowdfunding and personal loans.
If you're looking to improve cash flow, our guides to getting overdue debtors to pay your invoices and tips for reducing business costs are popular resources.

What is a Small Business Loan?

Small business loans are financial products specifically designed for small business owners to help them fund their operations, expansion, or any other business-related expenses. Several options are available for small business owners seeking a loan, including traditional bank loans, alternative lending platforms, specialist business lenders, government-backed programs, and more.

What types of small business loans exist to help businesses in New Zealand?

There are multiple types of small business loans available in New Zealand:

Secured loans

Secured loans are backed by collateral, such as equipment, real estate, or other assets. If the business cannot make its loan payments, the lender may seize the collateral to recover its money.

Examples of secured small business loans in New Zealand include:

Equipment financing loans: These loans are used to finance equipment purchases, and the equipment is used as collateral for the loan.
Commercial mortgages: These loans are used to finance the purchase or refinance of commercial real estate, and the property itself is used as collateral for the loan.

More details: Our guide to comparing business loans lists many lenders who offer secured loans.

Unsecured loans

Unsecured loans don't require collateral, and the lender relies on the business's creditworthiness to secure the loan.

Examples of unsecured small business loans in New Zealand include:

More details: Our guide to comparing business loans lists many lenders who offer unsecured loans.

Personal (term) loans

These loans provide a lump sum of money repaid over a set period, typically with fixed monthly payments.

More details: Our guide to personal loans lists lenders who work with business owners needing short-term financing.

Revolving line of credit

These loans provide a pool of money that the business can draw from as needed, and the business is only required to pay down interest on the amount it borrows.

Invoice financing

These loans allow businesses to borrow against their outstanding invoices, with the invoices themselves serving as collateral for the loan.

Maximise Your Business Potential with MoneyHub's Top-Rated Lender Choice

If you're looking for a business loan, choosing a lender that offers competitive rates, fair terms and wants to lend is essential. In our search for such lenders, one name that stands out is Prospa.

Prospa: A Practical Choice for Business Borrowers
Our business loan research indicates that Prospa often offers lower interest rates and fees than many traditional lenders, helping businesses manage costs effectively. We have seen it become popular with many MoneyHub users who are business owners.

Straightforward Application Process
Applying with Prospa is simple and takes just a few minutes. There's no commitment required when you apply, so you're free to consider your options without any pressure.

Why Comparing Rates Matters
We always suggest business owners compare different loan offers. Applying with Prospa is free, and by comparing, you increase your chances of finding a loan that suits your business's needs and budget.

Long-Term Impact of Your Interest Rate
The interest rate on your loan will influence your repayments over time. Considering how this will affect your business finances in the long run is important.

Our Advertising Transparency
MoneyHub may receive a referral commission, but this does not influence our recommendations. Our priority is to provide reliable and unbiased information. Interest rates and assessment times can vary based on your circumstances.

Get Started
Visit Prospa to explore their offerings and see if they meet your business lending needs. Remember, making an informed choice will almost always make a big difference to your business's financial future.

Get an Offer From Prospa

Christopher Walsh
MoneyHub Founder

Our Top Business Loans Provider:

Alternative Funding Option: Taxi Business Funding

Unlock flexible, low-cost business funding with Taxi, an innovative alternative to traditional business loans.
Taxi allows businesses to borrow funds equivalent to up to 90% of their provisional tax payments and offers fast access to working capital without the hassle of personal guarantees or lengthy loan applications.
Compared to standard business loans and overdrafts from the banks, Taxi stands out with significantly lower interest rates and flexible repayment options.
Taxi offers an affordable solution for facing cash flow challenges, expanding, or managing seasonal dips.

Know This: By using your provisional tax as collateral, you can secure funding without impacting your existing credit lines or providing additional security. With no hidden fees, penalties for early repayment, or complex paperwork, Taxi is a game-changer for NZ businesses.

More Details: Our full Taxi Review explains how you can benefit from this unique funding service. Our friendship with Taxi means that qualifying businesses get a 10% discount on quarterly facility fees.

Visit Taxi

Why Would I Apply for Small Business Loans NZ?

Why Would I Want to Apply for a Small Business Loan?

There are multiple reasons a small business throughout New Zealand might want to apply for a small business loan. Some common reasons include:

To finance the expansion of the business

A small business loan can provide the money needed to purchase additional equipment, expand into new markets, or hire more staff. Without a small business loan to fund this expansion, businesses may not be able to grow as fast as they would ideally like to, meaning other competitors can grow faster and steal market share.

To cover operating costs

A small business loan can help a business meet its day-to-day operating expenses, such as rent, utilities, and payroll. However, note that small business loans are usually short-term fixes to long-term problems, and a small business loan isn't the final solution to a problem. Instead, they can be the beginning of the end - fixing the underlying issues (lack of sales, uncontrolled costs etc) is essential to continue as a going concern.

To improve cash flow

A small business loan can provide a business with the cash it needs to cover short-term expenses while it waits for customer payments or other sources of income. Sometimes, businesses may be profitable but experience unfavourable timing regarding when invoices are sent and when money is paid.

Small business loans can bridge this gap and ensure that businesses can pay their staff and suppliers or purchase new equipment on time. Our guide to getting debtors to pay overdue invoices has scripts and tips to speed up cash collection.

To finance a special project

A small business loan can be used to fund a one-time project, including developing a new product or starting a marketing campaign. However, careful budgeting and a well-tested ROI analysis is essential to ensure the money borrowed is spent in the right places.

To take advantage of a business opportunity

A small business loan can provide the money needed to take advantage of a business opportunity that may not have been possible without additional financing.

Which Businesses are Eligible for Small Business Loans?

The terminology for what defines a "small business" varies by lender. However, in New Zealand, small businesses are typically defined as those with fewer than 20 full-time employees. However, the eligibility criteria for small business loans can vary depending on the lender and the type of loan product.

While the approval of small business loans will be subject to each credit provider’s unique criteria, generally, small businesses that apply for a small business loan will be vetted against the following criteria:

The business is a registered company or sole trader operating in New Zealand.
The business has been in operation for at least one year, although some lenders may consider businesses that have been operating for a shorter period.
The business has a good credit history and can demonstrate the ability to pay back the loan.
The business has a viable business plan and can demonstrate the potential for growth and profitability.
The business has sufficient collateral to secure the loan if required. This may be in the form of a personal guarantee from a director/business owner.

Important: Lenders may have additional eligibility criteria that must be met to qualify for a small business loan. Therefore, it's a good idea to speak with a lender to determine the specific eligibility requirements for the loan product you are interested in.

Useful resources:

Do you want to apply for a loan? Our business loan comparison has the latest offers.
Are you looking for alternatives to business loans? Our guides to finance leases and operating leases explain your options. Our guide to business borrowing options further explains all the options, including government grants, crowdfunding and personal loans.
If you're looking to improve cash flow, our guides to getting overdue debtors to pay your invoices and tips for reducing business costs are popular resources.

How Can I Apply for a Small Business Loan NZ?

How Can I Apply for a Small Business Loan? What's the Process?

To apply for a small business loan in New Zealand, you’ll need to follow the following steps:

Determine your borrowing needs

Before you start the application process, it's important to determine how much you need to borrow and for what purpose. This analysis will help you choose the right loan product and lender. If you borrow too little, you may need to go back and pay a higher interest rate, whereas if you borrow too much and draw it down, you'll be paying interest which needs to be paid for my revenue.

Our View: Getting the numbers right upfront is a process which shouldn't be rushed - the consequences for inaccuracy are expensive.

Research your options

There are a variety of small business loans available in New Zealand, so it's important to research your options and choose a loan that meets your needs. Our guide to the best business loans is a helpful starting point. Consider factors such as interest rates, repayment terms, and fees when comparing loan products.

Gather the necessary documents

Most lenders will require you to provide certain documents as part of the loan application process. These may include financial statements, tax returns, business plans, and collateral. The faster you supply these documents the quicker a decision will be made about the loan.

Prepare a business plan

A business plan is a document that outlines your business goals, strategies, and financial projections. It can help you present a clear and compelling case to lenders about why you deserve a loan and how you plan to use the funds.

Useful business plan guides and templates are available from the government, Shopify and Xero.

Apply for the loan

Once you have gathered all the necessary documents and prepared a business plan, you can start the loan application process. This process typically involves filling out an application form and submitting it to the lender along with the required documents.

Wait for a response and reply to inquiries

After you submit your loan application, the lender will review it and decide whether to approve or deny your request. This process can take several weeks, so patience is important. If your application is approved, the lender will provide you with a loan agreement outlining the terms and conditions of the loan.

What Types of Small Business Loans are Available in New Zealand and Who are the Main Providers?

Know This First: Lenders will either offer secured loans or unsecured loans. Both have significant risks.

Secured loans typically charge lower interest rates but carry a higher risk of losing your collateral if you default on the loan.
Unsecured loans have higher interest rates but do not require collateral.
However, to take out a loan, you may be asked to sign a personal guarantee which means you'll be liable if the business fails to repay the loan.

There are many different types of small business loans available in New Zealand, including:

Bank loans: Bank loans are the most common type of small business loans offered by traditional banks and financial institutions. Bank loans can be secured (meaning you need to provide collateral, such as assets or property) or unsecured (meaning you don't need to provide collateral).
Alternative lending platforms: These are online platforms that connect small business owners with lenders, including banks, alternative lenders, and investors. Alternative lending platforms offer a range of loan products, including short-term loans, invoice financing, and crowdfunding. Examples of alternative lending platforms include Bizcap, Harmoney and Prospa.

Traditional banks (Tier 1 banks)

Tier 1 banks (such as Westpac, ASB, ANZ and BNZ) have dedicated small business banking teams that support New Zealand companies with banking, loan and other financial products.

If you have an existing business relationship with a bank, this is most likely to be the best starting point.

Heartland Bank (Tier 2 banks)

Heartland Bank is a New Zealand-based lender that offers small business loans to eligible borrowers. Heartland's small business loans are secured or unsecured, depending on the specific loan product chosen.

Heartland's small business loans have a minimum loan amount of $5,000 and a maximum loan amount that varies depending on the loan product. The interest rate and terms of the loan will depend on the borrower's creditworthiness and the specific loan product chosen.

Heartland's small business loans are available to businesses operating for at least six months and have a minimum annual revenue of $50,000. Businesses must also have a good credit score and a reasonable debt-to-income ratio.

Our View: Heartland's small business loans may be a good option for New Zealand businesses looking for a secured or unsecured financing solution. However, it's important to carefully consider the terms and conditions of any small business loan before accepting it, as the loan will significantly impact the business's financial situation.

Website: Heartland Bank

Prospa (Specialist Business Lender)

Prospa is an Australian-based online lender that offers small business loans to eligible borrowers in New Zealand. Prospa's small business loans are unsecured, so they do not require collateral.

Prospa's small business loans have a minimum loan amount of $5,000 and a maximum loan of $250,000. The interest rate and terms of the loan will depend on the borrower's creditworthiness and the specific loan product chosen.

Prospa's small business loans are available to businesses operating for at least six months and have a minimum annual revenue of $50,000. Businesses must also have a good credit score and a reasonable debt-to-income ratio.

Our View: Prospa's small business loans may be a good option for New Zealand businesses looking for a flexible, unsecured financing solution. However, it is important to carefully consider the terms and conditions of any small business loan before accepting it, as the loan will significantly impact the business's financial situation.

Website: Prospa

MTF finance (Finance companies)

MTF Finance is a New Zealand-based lender that offers small business loans to eligible borrowers. MTF Finance's small business loans are secured, which means they are backed by collateral, such as equipment, real estate, or other assets. If the business is unable to make its loan payments, the lender may be able to seize the collateral to recover its money.

MTF Finance's small business loans have a minimum loan amount of $5,000 and a maximum loan of $500,000. The interest rate and terms of the loan will depend on the borrower's creditworthiness and the specific loan product chosen.

MTF Finance's small business loan products include:

Equipment financing loans: These loans are used to finance an equipment purchase, and the equipment is used as collateral for the loan.
Commercial mortgages: These loans are used to finance the purchase or refinance of commercial real estate, and the property itself is used as collateral for the loan.

MTF Finance's small business loans are available to businesses operating for at least six months and have a minimum annual revenue of $50,000. Businesses must also have a good credit score and a reasonable debt-to-income ratio.

Overall, MTF Finance's small business loans may be a good option for New Zealand businesses looking for a secured financing solution and are willing to pledge collateral in exchange for a loan. However, it is important to carefully consider the terms and conditions of any small business loan before accepting it, as the loan will significantly impact the business's financial situation.

Website: MTF Finance

Harmoney

Harmoney is a New Zealand-based online lender that offers small business loans to eligible borrowers. Harmoney's small business loans are unsecured, so they do not require collateral.

Harmoney's small business loans have a minimum loan amount of $5,000 and a maximum loan of $500,000. The interest rate and terms of the loan will depend on the borrower's creditworthiness and the specific loan product chosen.

Harmoney's small business loan products include:

Term loans: These loans provide a lump sum of money repaid over a set period, typically with fixed monthly payments.
Line of credit loans: These loans provide a pool of money that the business can draw from as needed, and the business is only required to pay interest on the amount it borrows.
Invoice financing: These loans allow businesses to borrow against their outstanding invoices, with the invoices themselves serving as collateral for the loan.

Harmoney's small business loans are available to businesses operating for at least six months and have a minimum annual revenue of $50,000. Businesses must also have a good credit score and a reasonable debt-to-income ratio.

Overall, Harmoney's small business loans may be a good option for New Zealand businesses looking for a flexible, unsecured financing solution. However, it is important to carefully consider the terms and conditions of any small business loan before accepting it, as the loan will significantly impact the business's financial situation.

Website: Harmoney

Maximise Your Business Potential with MoneyHub's Top-Rated Lender Choice

Get an Offer From Prospa

Christopher Walsh
MoneyHub Founder

Our Top Business Loans Provider:

Alternative Funding Option: Taxi Business Funding

Unlock flexible, low-cost business funding with Taxi, an innovative alternative to traditional business loans.
Taxi allows businesses to borrow funds equivalent to up to 90% of their provisional tax payments and offers fast access to working capital without the hassle of personal guarantees or lengthy loan applications.
Compared to standard business loans and overdrafts from the banks, Taxi stands out with significantly lower interest rates and flexible repayment options.
Taxi offers an affordable solution for facing cash flow challenges, expanding, or managing seasonal dips.

Visit Taxi

What are the Pros and Cons of Taking on a Small Business Loan?

Pros:

Access to capital (that you otherwise wouldn’t be able to get).

A small business loan can provide the necessary financial resources to grow a business. Getting a small business loan can be especially helpful if the business does not have enough capital or cannot secure funding through other means, such as investors or grants.

Flexibility around funding.

Small business loans come in various forms, including term loans, line of credit loans, and equipment financing loans. Businesses can choose the type of loan that best meets their needs and financial situation.

Potential for increased growth (inorganic).

By using a small business loan to invest in things like marketing, new equipment, or additional staff, a business may be able to expand and grow more quickly than it otherwise would have been able to. This type of growth is defined as inorganic growth because it would otherwise not have occurred without small business funding or investment into new products.

Improved business credit score.

Repaying a small business loan on time can help a business improve its credit score, making it easier to secure additional loans in the future.

Potential tax benefits.

Depending on the specific terms of the loan and the business's tax situation, the interest paid on a small business loan may be tax-deductible. This tax deductibility can mean that Kiwi businesses can offset some of the cost of the loan through tax savings.

Cons:

A higher debt burden.

A small business loan is a form of debt, and taking on debt can be a financial burden for a business. The business will be required to make regular loan payments, which can strain its cash flow.

Increased monthly costs/outlay from interest expense.

Small business loans typically carry 'above mortgage rate' interest charges. The interest rate and terms of the loan will depend on the lender and the business's creditworthiness, but in general, higher interest rates can make the loan more expensive.

Increased risk of defaulting on your loan.

If a business cannot make its loan payments on time, it may default, which can have serious consequences. For example, the lender may take legal action to recover the money, and the business's credit score may be damaged, making it more difficult to secure additional loans in the future.