Business finance: The old ways of borrowing vs today

Out with the old NZ

Without reliable cash flow and capital for growth, small businesses can struggle to get ahead. When finance is needed, small business owners have traditionally gone cap-in-hand to the banks – or, if they’re lucky, a rich relative.

But things are changing and new forms of small business lending are becoming more popular. Here are some reasons why:

Out with the old ways of business finance | Prospa NZ

New research from Prospa has shown that the post-COVID small business recovery is gaining momentum, with one in three Kiwi small business owners planning to invest in new products and services in 2021.

But cash flow has been a major stumbling block for businesses getting running again. For instance, two thirds of New Zealand SME owners reported that a lack of cash delayed their reopening after lockdown.

COVID-19 has only aggravated long-standing trends showing small business owners are finding it more difficult to access funding from traditional lenders such as banks.

In fact, Prospa’s own survey of more than 200 New Zealand small business owners found that almost three in five feel it is getting harder to access funding from banks and other traditional lenders. They’re finding there’s too much red tape, too many delays and finance products aren’t suited to the reality of small business.

Three in five small business owners feel it is getting harder to access funding from banks and other traditional lenders.
Not only that, Prospa’s research found that of the 63% of business owners who had tried to access funding for their business, more than half had missed out on opportunities to grow because they couldn’t access funding when they needed it.

This comes as no surprise to Geoffrey Hughes, director of Hughes Judd Accounting.

“Small businesses generally need small amounts fast as they tend to be more reactive to business needs,” he says.

Speed is of the essence

The findings echo those from a 2019 Small Business Council of New Zealand (SBC) report, which found the relatively slow pace of traditional bank loan approvals and funding as a key shortcoming for many small businesses.

“Businesses are often left waiting on the outcome of approval processes and they may miss opportunities to develop, grow and reach their potential,” the report said.

Interested in learning more about today’s way to borrow? Talk to a Prospa small business lending specialist on 0800 005 797 or find out more.

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