How this adviser secured a Prospa Business Line of Credit for her client
Access to a Prospa Business Line of Credit provides on-demand, flexible funding. Here’s how it works, and how one Prospa Partner helps her clients obtain Line of Credit funding.
At a glance
- Appetite for line of credit funding is growing – but many clients remain unaware of its potential benefits.
- A Prospa Business Line of Credit provides ongoing access to funds that can help cover unexpected gaps in cash flow.
- Lisa recently helped secure a Prospa Business Line of Credit for one of her clients, helping them continue operations – and thrive.
Small business clients have access to more funding options than some may realise.
Of the one in three small business owners intending to take up a borrowing product in the next 12 months, just three per cent identified a line of credit as their product of choice – compared to eight per cent of owners interested in a small business loan.*
Despite uptake being comparatively low, advisers are uniquely positioned to provide insight into the benefits of a line of credit to their small business clients. And with different finance options suiting different clients’ needs, it’s important to address this gap in awareness about a line of credit.
We spoke with an adviser who helped their client secure a line of credit funding, asking how they did it and what benefits it brought for the client.
What is a Business Line of Credit?
But first, a quick explainer to consider using when educating clients about this financing option.
The Prospa Business Line of Credit provides small businesses clients 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 used
- Reuse funds as often as needed over the term
Examples of how it can be used include covering staff wages, paying overdue invoices, purchasing stock and paying suppliers.
How Lisa secured a Business Line of Credit for her clients
Loan Market’s Lisa Meredith is a Prospa Partner who helped one of her clients successfully secure a Prospa Business Line of Credit.
Reflecting on her 18 years of mortgage broking, Lisa says “it’s so hard, probably more so in New Zealand than in Australia, to get business funding”.
That’s why, earlier this year, she suggested a client consider a line of credit rather than a business loan.
“I had clients who were interior designers,” says Lisa. “They’d been operating for about nine months.
“They rang me up saying, ‘We need $50,000.’ I talked to them about the Prospa Small Business Loan, but often small business owners want something they can draw down on when they need it – not necessarily all in one hit.”
Lisa helped secure a Prospa Business Line of Credit for the couple, the first of many clients in recent months.
“It was at a time when they were stressed out,” she adds. “It was critical for them [to secure funding]. And they were so happy.”
The essential value of the product lies in it being a salve for irregular cash flow, says Lisa.
“A plumber or builder usually gets paid each week,” she says. “But in the design business, they do the work up front and get paid towards the end – so they don’t necessarily have that cash flow coming through.”
In other words, access to quick and flexible funding provided her client with a practical, tangible cash flow solution.
A quick guide to a Prospa Business Line of Credit
Eligibility: To apply for a Prospa Business Line of Credit, clients need to:
- Be a New Zealand citizen or permanent resident
- Be over 18 years old
- Own a New Zealand business with a valid NZBN
- Prove six months of trading for a new business, or three months if they’ve purchased an existing business
Cost: From the date of settlement, a Weekly Service Fee is charged. Clients only pay interest on the funds they draw down, and interest is only charged until they repay the funds. Interest is charged weekly and at a fixed rate.
Funding terms: Towards the end of the Prospa Business Line of Credit term, clients can choose one of two options:
- They can apply to renew the Prospa Business Line of Credit for an additional 24 months. After a quick assessment and if the renewal is approved, they can review the Line of Credit amount based on their business needs.
- They can close the Prospa Business 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.
*RFI Global New Zealand SME Banking Council, May 2022