- Why you need the loan. This helps you decide what specific type of business loan to apply for. Some loans are designed for equipment, whereas others may be used to cover cash flow issues. It’s essential to have a clear understanding of the purpose of the loan to help narrow down your options.
- How much you need to borrow. Different business finance options are more or less suitable for particular loan amounts.
- The size and age of your business. Many lenders have strict criteria that your business needs to meet to be eligible for a loan, which may include a minimum trading history or turnover. This affects which loans you can apply for.
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Best business loans*
Compare business loans to find the best one for you
When you’re looking for a business loan, it makes sense to keep looking until you find the ‘best’ loan for you. However, what makes a business loan the best?
Find out what to look for and compare business loans below.
Compare business loans
There is no single factor that determines what is the best loan for your business, but there are a number of things you need to keep in mind when considering a business loan. With the number of finance options currently available to businesses, it pays to have a clear understanding of both your business’s current situation and financial needs before you apply for a loan.
The business loan that is best for a start-up with no trading history is different to the one that is best for an established business, and so you need to consider the following when deciding which business loan may be the best for your business.
What type of business loans are best for my business situation?
See what the best business loan options are for businesses in the following positions:
My business has cash flow issues and needs ongoing, flexible access to funding
- Business line of credit
- Business overdraft
- Invoice financing
I need a cash injection for my business and plan to pay it off within a year
- Short-term business loan
- Working capital finance
My business has outstanding invoices affecting cash flow
- Invoice financing
I have an asset I can use as security for a business loan
- Secured business loan
I want a business loan, but not from the big banks
- Peer-to-peer business loans
Andy and Malak are both ready to apply for business loans. What is the best business loan for each to consider?
Andy’s business has been operating for less than a year and has had a bit of a rocky start. Andy doesn’t have an asset to offer as security for the loan but is hoping to borrow $10,000 to purchase discounted stock that should last his business for the next year. What’s the best business loan for Andy? Ideally, he needs to find a lender that is willing to offer him an unsecured business loan with a loan term of about 12 months.
Malak’s business is well-established and has been highly profitable over the last five years. However, his business has cash flow issues as he works with large contractors that have long invoice terms. What would be the best business loan for Malak? Invoice financing could be an excellent solution, giving Malak access to up to 80 to 90% of the amount of each invoice immediately after the invoice is rendered, without him having to wait until the invoices are correctly paid.
In each case, the ‘best’ business loan for Andy and Malak is one that helps their businesses’ cash flow in a way that is tailored to their individual business needs.
How can I compare business loans to find the best one?
When comparing business loans, consider the following features:
- Interest rate. Determine whether the interest rate on offer is fixed or variable, as well as the rate itself.
- Fees and charges. The interest rate is not the only major cost of business finance to consider. Calculate the total cost of the loan by accounting for application or establishment fees, ongoing account-keeping fees, early-exit fees and other charges or penalties that may apply.
- Loan security. Is the loan secured or unsecured? If you have an appropriate asset to put up as security for the loan, you can benefit from interest rate discounts and other favourable loan terms. New Zealand’s big banks may prefer secured business loans, while smaller and independent lenders are more willing to consider unsecured funding for businesses.
- Loan term. Consider the amount and purpose of the loan when determining how appropriate the loan term is. Business loan terms can vary widely, from as little as three months to 10 years or longer. If purchasing an asset with the loan funds, choose an appropriate loan term so that you’re not paying off the asset long after it has reached the end of its useful life.
- The loan structure. Does the loan offer an ongoing credit facility or a one-off lump sum payment? Ongoing credit facilities tend to suit businesses that need regular cash flow relief, while a lump-sum loan could be most useful for a one-off purchase, such as a vehicle or new equipment.
- Repayment schedule. Consider how often loan repayments are made, and how this fits in with your business’ cash flow. Businesses with high cash turnover rates such as a fresh produce store could benefit from weekly or even daily repayments, while businesses with fewer, larger clients and long invoice payment terms, such as a construction company, may prefer quarterly repayments.
Am I eligible for a business loan?
Most business lenders have certain criteria that you need to meet to be eligible. Consider the following to determine whether you’re likely to be approved for a business loan:
- New Zealand Business Number. You may need to hold a New Zealand Business Number (NZBN) to be eligible for a business loan in New Zealand. It can help speed up the lending process with credit agencies.
- The age of the business. The majority of lenders, especially the big banks and other large lenders, require businesses to have been in operation for at least one year before being eligible for a business loan. Some alternative and smaller lenders may offer unsecured loans for start-ups and businesses that have been operating for less than a year.
- Credit history. For established businesses, their credit history becomes a major deciding factor in the business’ eligibility for a loan. In some instances – particularly where businesses do not have a strong or long enough trading history – the personal credit records of directors and major shareholders are also considered.
- Turnover. Lenders offering business loans need to satisfy themselves that the business can easily afford the loan repayments. Lenders look at a business’ turnover to gauge the profitability of the business and their cash flow situation. This requirement will vary for some loan types, such as a merchant cash advance, which look at the average credit card transactions of a business.
The interest rates offered by each provider are indicative interest rates that have been supplied by each provider. These rates change often. Please ensure you confirm the actual interest rate with the relevant provider prior to applying for any loan.
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