New Zealand Business Owner outside store

Business Loan

Open up your options with a Business Loan

A business loan offers the financial power to take your business to the next level or the capital to start your new business journey. We discuss some important things you need to know before we start the process.

Calculate how much you can afford 

Calculator for mortgage repayments

Begin the loan application process

 

Purpose

Businesses face many situations where they need extra financial support and often it will promote further expansion. A business loan can be accepted for a range of purposes surrounding business. The following lists some of the uses available.

> Buying an existing business

> Starting a new business or franchise
> Major investments into own business

Business loans can be the kickstart that you need to unlock growth in a new or existing business. However, it should be a well thought out decision because adding another cost to the business is a large risk. Talk with one of our specialists to get the loan that is right for you and your business. 

 

Process

Security

Some lenders may offer unsecured business loans which is when there is no security held over the loan. This, in most cases, is limited to a maximum of $50,000. Any higher request of lending will need some form of security attached. The business can be used as the security, but the Loan-to-Value Ratio (LVR) is often restricted to only 50%. The security acceptable can include, stock or other assets that the business holds.

It is possible to include your owner occupied house or other property as a security. This will allow a higher LVR of up to 80%. This is generally something you should avoid, in order to reduce the personal liability attached to the business. A personal guarantee can also be used as a security from someone inside or outside the business.

 

A business loan is considered by lenders to be more of a risk than a home loan because the debt being repaid is dependent on the success of the business. As a result, the process to get a business loan accepted is more complex and requires more information. 

To assess the risk of the loan, lenders will analyse the business as a whole and your competence as the current or prospective business owner. Lenders will consider your experience, both, in general business and specific to the industry the business operates in.

The business itself will be assessed based on its operations and the longevity of the industry to ensure the long-term risk of failure is minimal.

To prepare for this, you should form a business plan and financial documents. It could worth potentially consulting with an accountant to assess these documents. Your financial accounts will need to be up-to-date and may need to be completed more recently than the previous financial year.

 

Interest Rates

Because of the increased risk that businesses bring in their ability to fail and default there are generally higher interest rates attached to the loan.

The length of time the business has been in operation and size of the business are large contributors to the interest rate that will be offered. The perceived risk of business loans varies between businesses but by working with one of our specialists, we will provide options from a range of lenders and ensure we get the best loan for you and your business

How can our specialists help?

As you now know, there is a lot to think about when it comes to getting a loan. Fortunately, we are here to help you through this process.