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How to Get a Small Business Loan in New Zealand
Businesses don’t just open. It would be great if you could just decide on a plan and grab a space. It would be even better if you could just borrow all of the supplies and pay for them as you earn money. If the business doesn’t end up working out, then you could just return everything when you close up shop. Unfortunately, that isn’t what it is like to start a small business. Everything costs money. Most likely you will be spending money all while you aren’t bringing anything in. There will be application and permitting costs, overhead costs, inventory costs, employee costs, supply costs, rent costs, and remodeling costs. Most shops or businesses aren’t move in ready.
The more likely scenario is that you will drain most of your savings and still need to borrow money from a lender to start the business up. Don’t worry. This is normal. It is to be expected that a small business will be fully leverage once the doors open. The key in New Zealand is to understand how you can gain access to the funds you need to get the business going. If you don’t have the funds, the doors don’t open, or you’ll only be presenting half a finished product to your customer base. Reach out to your mortgage broker to set up a personal meeting about your necessary finances and how you can get cash out of a secured loan or a personal loan for your small business.
Small Business Loans Are the Bread and Butter of the Economy
The world runs on small businesses. You may think that most of the places you go to are large corporations but think of all of the small businesses that keep your local economy running. This includes all of the home services like plumbers, laborers, woodworkers, steelworkers, construction crews, remodel crews, electricians, and many other skilled laborers. Further, many of the doctors that you see are technically small businesses. The eye doctor, dentist, surgeon, general care, and specialized care services are commonly done by someone with a private firm. Even franchises are locally owned and operated and need their own capital to open the doors. New Zealand’s small business economy contributes as much as 28% of the overall economy.
Because of the massive need for financing in the small business world, most lending groups have developed specialized small business loans in New Zealand. To understand if any of the exotic loans could work as your business loan, you should speak with a mortgage broker as soon as you have a business plan. They will be able to step you through your options with specialized offers based on your individual needs for your business and your financial history.
How a Business Loan Can Help
There are several reasons to obtain a business loan:
- Expansion- when business is profitable, you may need to expand to take advantage of more opportunities
- Equipment- purchasing new or updated equipment will allow you to improve your company’s throughput and better serve your clients with higher quality deliverables.
- Inventory- with a large order, you may need to increase your inventory, and your current cash may not be sufficient to do this.
- Cash flow- We often need to pay employees, purchase raw materials, and cover tax bills, but our cash on hand is tied up in the business in more profitable ways.
- Improve current loan terms- we may have had a loan from before that we can refinance and obtain better terms
Talk to a Mortgage Broker About a Small Business Loan in NZ
When you are ready to jump into the deep end of the small business world you need to know what you are doing. Hoping that things just come together won’t be the best solution. Further, without a plan, things will take significantly longer than they should. So, here are some basic tips that you can use to set up the basics for your mortgage broker.
Don’t show up at your broker’s office and say, I want to start my own business. You need to be a little further than that. Instead you need to start journaling your wants, desires, thoughts, and inspirations immediately. The more you put on paper, the more you will remember and be able to follow through on later down the road. With proper planning in place you can fully establish your goals and dreams with your new small business. Making lists of things is the best way to start the organization of the planning. Make lists of ideas, locations, products, services, requirements, logos, names, and anything else that is an obvious part of the larger project.
Review your credit rating
When you go to borrow money, your credit rating will be part of the financial package. Make sure that your report is not only up to date, but also, it must reflect what your credit history is accurately. Make any necessary changes and try to do everything you can in the meantime to boost your score. A low credit rating or high debt to income ratio isn’t going to kill your dreams, but it will influence the type of loan you get and the terms that you are able to negotiate.
Prepare a formal business plan
Once you have solidified a small business idea, you need to create a formalized business plan. This is basically a schematic of every aspect of the business. Think about all of the different angles of your business. What is the color scheme going to be? How about the size of the counters? Put it all in the plan and bring it to your mortgage broker.
Determine what volume of cash you need
Once you have a plan it should be a simple enough exercise to figure out how much money you will need to open the doors based on the proposal that you have created. That is your starting point. From there you can work with your mortgage broker on your type of unsecured business loan, secured small business loan, or potentially second mortgage that will help you follow through with the project.