Getting your business loan sorted the right way
With unpredictability looming in the current financial markets, now could be a great opportunity to venture out. Did you know that 97% of all New Zealand businesses are comprised of SME’s according to Stats NZ as of Feb 2021? Small to medium sized businesses are a big contributor to the lifeblood of the New Zealand economy. New Zealand as a nation also has a huge proportion of people who are self-employed that make up this volume. Comparatively speaking New Zealand’s large enterprises are usually smaller than other countries overseas.
New Zealand’s business community and government commonly use the following definitions:
• sole trader – 0 employees
• micro business – 1 to 5 FTE employees
• small business – 0 to 19 FTE employees
• medium business – 20 to 49 FTE employees
• small and medium enterprise (SME) – 0 to 49 FTE employees
• large business – 50 or more FTE employees
Businesses in New Zealand
As you can see below, New Zealand is a nation of small businesses. Of the 562,521(figure 1 Stats NZ) businesses in New Zealand we see that a huge proportion of businesses in New Zealand have less than 20 employees. We can also see the breakdown of these businesses below as per the Statistics NZ website Feb 2021.
• 400,488 (71%) have no employees
• 102,099 (18%) have 1-5 employees
• 43,536 (8%) have 6-19 employees
• 10,554 (2%) have 20-49 employees
• 5,844 (1%) have 50 or more employees.(rounded)
546,123 out of 562,521 = a whopping 97% of New Zealand is Small Business
With such a large proportion of businesses being small business, it makes sense to get advice from financial advisers who can give you and your new business the attention it deserves.
Small businesses in general are privately owned and operated with firm control and no formal governance arrangements. They in general, are restricted when it comes to financing due to a lack of resources whether that’s funding, staff, or time.
If wearing multiple hats, have a drive to succeed, ambition, and growth sounds like part of you it may be worth looking into your own small business goals. Having a small business requires having a good financial footing from the very beginning.
What is a business loan?
If you need capital to invest in a new or current business, you will need a business loan. It’s a specific type of purpose filled loan that can potentially get you wholly or partly home loan rates whilst at the same time helping you develop and grow your business. You will need to prove to the bank that your business venture will be feasible and profitable. You also need to have the background and experience to run the business and that you will be easily able to repay the loan within the set timeframe.
Types of business loans
When taking out a business loan although there are a range of options available generally, they come under two types. Line of Credit or Term Loans.
You select your interest rate and term alongside a repayment period that suits your cashflow needs. You borrow a lump sum, then make regular fixed repayments over a set period of time. You can get larger amounts to suit your business needs with a term loan as opposed to a line of credit. More suited to larger purchases such as buildings.
Line of Credit
Kind of like a credit card. It gives your business access to a pool of funds up to a limit. More suited to smaller purchases for the business. This can be things like inventory purchases and your day-to-day expenses. Business lines of credit can be secured with collateral, and you may be able to get a lower interest rate.
Every lender has different requirements, but one thing rings true in that there are four key core components that a lender will be looking for when assessing your ability to carry a business loan:
If you are looking for top financial advice whatever your business situation may be, we can get you going in the right direction. When making your business finance decisions look no further than Global Financial Services. They work with a range of lenders and can find a solution for you and your business needs as well as help you pay down your loan faster through it’s innovative Mortgage Genius Plan®.
Global Finance has been in the financial services space for mortgage and Insurance services for over 21 years. Global Finance has the know-how to get your business financing over the line. With a dedicated team of experienced advisers, you can be sure you are in good hands.
If you would like to discuss any of your business financing options, you can talk to the friendly team today to get all your business solutions sorted in a way that gets you ahead a lot faster.
Call 09 255 5500 to get started and talk to leading financial advisers today.
*Figures Sourced – Enterprises, geographic units, and employee count, by industry ANZSIC06 – Statistics New Zealand ‘Table 1 – Feb 2021
**These are general guidelines and are by no means a reflection of bank or lending policies