How one business prepares for the unexpected with a Line of Credit
Access to a Prospa Business Line of Credit provides fast, flexible funding. Here’s how it works and how one business owner uses it to manage uncertainty caused by changes to staffing and the supply chain.
Small businesses managing cash flow spikes and dips, or looking to invest in stock and staff, may need to access funds at short notice. Recent research from RFi Global found that 1 in 10 small businesses in New Zealand holds a line of credit, and more than half of small and medium businesses are interested in taking out a line of credit over the coming year.*
What is a Business Line of Credit?
The Prospa Business Line of Credit provides small businesses with ongoing access to funds that help make the most of opportunities and reduce the impact of short-term cash flow dips.
Features of a Prospa Business Line of Credit include:
- Ongoing access to between $2k and $150k
- 24-month term with the option to renew
- Only pay interest on the funds you use
- Reuse funds as often as you need to over the term
A Business Line of Credit provides flexibility to cover unexpected gaps in cash flow. Examples of how it can be used include covering staff wages, paying overdue invoices, purchasing stock and paying suppliers.
Find out more and apply.
How Triple R Engineering used a Business Line of Credit
“We took the Prospa Line of Credit as a precaution … as we rely heavily on getting our materials from overseas and saw an increase in costs and delays in delivery.” – Debbie Delport, Director, Triple R Engineering”
Debbie Delport, Director of Triple R Engineering in Palmerston North, saw the Prospa Business Line of Credit as a handy way of dealing with the challenges presented by COVID.
“We took the Prospa Line of Credit as a precaution,” Debbie explains. “We had no idea how the economy was going to go as we began our journey through the various traffic lights of COVID.”
With speculation about tough times ahead for small businesses across most industries, Debbie looked for a way to manage uncertainty.
“I wanted to be prepared as we rely heavily on getting our materials from overseas and saw an increase in costs and delays in delivery. I was also keenly aware that staff shortages would be a risk due to isolation regulations and we have had to navigate our way around that,” she says.
Even now, as uncertainty recedes somewhat, the buffer is in place.
“It is great knowing that it’s available if and when we need it,” Debbie says.
How do you apply for a Prospa Business Line of Credit?
Applying for a Prospa Business Line of Credit is simple.
Firstly, you need to know if you qualify for a Line of Credit. You need to be a New Zealand citizen (or permanent resident), over 18 years old, own a New Zealand business with a valid NZBN and be able to prove 6 months of trading for a new business (or 3 months if you’ve purchased an existing business).
Then, just fill out the online form and a Prospa small business lending specialist will contact you to discuss the application and your eligibility.
What does a Prospa Business Line of Credit cost?
From the date of settlement, a Weekly Service Fee is charged on a Line of Credit. You only pay interest on the funds that you draw down, and interest is only charged until you repay the funds. Interest is charged at a fixed rate, calculated daily on the drawn balance and charged weekly.
Payments are made weekly via automatic repayment which is made up of any interest owed and a portion of the principal amount, plus any additional fees like the Weekly Service Fee mentioned above. You can make additional repayments at any time, which will reduce the balance that interest is payable on.
How do you access Business Line of Credit funds and what happens at the end of the term?
To access and use the funds in your Prospa Line of Credit, customers can use their Prospa Online Portal to draw down funds to a bank account, pay invoices or suppliers directly, and view transactions.
Towards the end of the Line of Credit term you can choose one of two options.
Firstly, you can apply to renew your Line of Credit for an additional 24 months. After a quick assessment and if the renewal is approved, you can review your Line of Credit amount based on your business needs.
Or you can close the Line of Credit and repay any outstanding balances. This can be done in a lump sum payment or, if eligible, through a 52-week repayment plan. Interest will continue to accrue on the outstanding balance throughout the 52 weeks at the same rate as the Line of Credit.
*RFI Global New Zealand SME Banking Council, May 2022
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