Business loans in New Zealand

Banks and online lenders

In New Zealand, business loans come from two main kinds of lender. Banks offer the biggest loans at the lowest rates. They usually want security, often your house, and a few years of financial statements, and the application can take weeks.

Online lenders like Prospa and Bizcap work differently. They decide quickly and lend smaller amounts over shorter terms, often without property as security. You pay more for that speed.

How lenders price a loan

Banks and some online lenders quote an interest rate. Others use a factor rate, a multiplier that sets your total repayment. If you borrow $50,000 at a factor rate of 1.2, you pay back $60,000, plus any fees.

A factor rate looks cheaper than it is, because you repay it in weekly or daily instalments over a short term. The true cost calculator converts the factor rate, fees and term into a true annual rate you can compare with a bank's interest rate. A factor rate of 1.2 over 12 months with weekly repayments works out to about 37% a year.

Secured and unsecured loans

A secured loan is backed by an asset the lender can sell if you stop paying, such as property, a vehicle or equipment. An unsecured loan has no specific asset behind it, so the lender usually asks each director for a personal guarantee instead.

What lenders look at

Lenders usually want to know:

• how long you've been trading
• your revenue, often checked through your bank statements or accounting software
• your credit history and your directors'
• what you'll use the money for
• any other debts the business has

Online lenders often connect to your bank account or accounting software to collect this directly, which is part of why they're fast.

Comparing offers

When you compare offers, check three things: the true annual rate, the total you'll pay back including fees, and the cost of paying the loan off early. A loan with a lower rate but a high early payout fee can cost more if you plan to clear it fast.