How you can use recent tax changes to fuel innovation

New Zealand has always punched above its weight when it comes to innovation and two new tax policies are aimed at further helping small businesses to continue to do so.

The new policies are aimed at reducing some of the risk of trying new things in your small business, making it easier to finance new methods and products, and are set to be in effect from the start of the 2020-2021 financial year.

So, if you’ve got a bright idea burning away at the back of your mind, now could be the time to start planning how to put these new incentives to work for you.

Tax credits for R&D

KPMG New Zealand Director, Byran Theunisen, says one of the most attractive incentives for small businesses is a new research and development (R&D) tax credit.

“Businesses will get back 15% of what they spend on qualifying R&D through a reduction in their tax bill,” he says.

To qualify, the R&D effort must be conducted systematically with the purpose of creating new ways and better processes, and services or products. It could be a new healthcare app, an algorithm or an improved method of manufacturing. Businesses must spend at least $50,000 on the R&D in a financial year for it to qualify.

Costs that are eligible for the tax credit include employee wages, depreciation on the R&D assets or the cost of plant used for the venture.

Theunisen says in addition to tax credits, businesses can also access the existing R&D grant funding, and expert and scientific assistance through Callaghan Innovation, including incubators, accelerators and researchers.

Through the combination of Callaghan Innovation and another government agency, New Zealand Trade & Enterprise, there is support for business planning and development, technology and market testing, as well as connections to international markets and capital.

Funding the feasibility ‘black hole’

In September 2019, the government also announced that from the next financial year onward, tax deductions would be available for “feasibility expenditure”.

This is money spent on pursuing a new process or product which does not ultimately lead to a depreciable asset for the business. Traditionally, these costs have not been deductible for tax purposes, making them known as black hole expenditure.

KPMG Tax Partner, Darshana Elwela, says feasibility expenditure is costs incurred to determine the practicality of a new initiative.

“This is where a business is looking to invest in a particular asset, either to construct or acquire a piece of plant and equipment, and there are costs associated with exploring how they do that,” he says.

“It will help businesses to make investments by providing greater certainty over the tax treatment of their project costs.”

Under the new rules, businesses will be able to write off the entire cost of any feasibility expenditure up to $10,000 in the same financial year. For larger sums, the expenditure can be written off over a period of five years.

Kirk Hope, the CEO of small business peak body BusinessNZ, says the current cost of exploring new enterprise is a “significant barrier to innovation”.

“This new tax rule will make it easier for more businesses to innovate and become more productive,” he says.

The type of costs that can be written off under feasibility expenditure include seeking relevant professional or expert advice about a new initiative, market research on a new product or market segment, or engineering surveys and environmental studies for a new building.

For instance, a café that is hoping to open a new location might hire a contractor to survey foot traffic flows in different areas to help it determine which area is the most suitable. Under the new rules that expenditure would be deductible.

Got your own bright idea for innovation? Talk to Prospa about how a small business loan could help turn the idea into reality.

The information on this website is provided for general information only and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from financial, legal and taxation advisors. Although every effort has been made to verify the accuracy of the information, Prospa, its officers, employees and agents disclaim all liability (except for any liability which by law cannot be excluded), for any error, inaccuracy, or omission from the information or any loss or damage suffered by any person directly or indirectly through relying on this information

Customer success story: DNA 1st Solution

DNA 1st Solution owner Anita Vaafusuaga didn’t want cash flow issues to cause her to miss a fantastic opportunity to grow. So, she used a Prospa Small Business Loan to overcome the problems caused by late-paying customers and buy space to nurture a program that helps South Auckland youth.

Hear more about DNA 1st Solution’s story:

Anita and DNA 1st Solution’s second calling

After spending 25 years of her life working for a manufacturing company – 13 on the factory floor and 12 as a warehouse supervisor – Anita leapt on an opportunity that presented itself.

In February 2012, by chance, she overheard her bosses saying they needed a product packing contractor. The idea sparked Anita into action, and she soon launched DNA 1st Solution, a packing and labelling business that prepares cosmetics and other products for shipping and sale.

Shipping and staffing

While packing is Anita’s main business, she uses her company to benefit the local community too. As part of their Kingfisher Program community outreach initiative, Anita employs young New Zealanders with little-to-no experience.

It’s a program that’s designed to give young people a start in life, and was something Anita launched in memory of her late husband, who loved to help his close friends and family. Twelve days after his death, a kingfisher bird came to her home, which is where the program’s name comes from.

“The most rewarding thing is the stories of the young people I hire, whether they’ve moved on to other things or they’re still with me,” says Niue-born Anita.

“We train them in the warehouse. From there, we see if they go into the packing part of the business. If not, we send them out skilled to work for other companies.”

Stop-and-go cash flow

Of course, for the Kingfisher Program to be successful, the business must be too.

Anita’s biggest hurdle is one familiar to many other small business owners: cash flow.

In 2016, Anita missed out on an opportunity to grow the business because she couldn’t access the necessary funds in time.

And like many other small business owners, Anita didn’t have a great deal of luck with traditional lenders.

“I tried a few times,” she says. “It takes too long. It’s too stressful. The questions they ask, the forms they want me to fill in.”

Then when an opportunity to grow the business by moving into a new warehousing facility presented itself in May 2019, Anita knew she couldn’t miss out.

She had a window of a week to complete the deal, so she called Prospa to take out a small business loan – and within seven days the company was in new premises.

“When the opportunity came about, we had to decide quickly, what do we do from here,” she says.

Fortunately, she had learned about Prospa’s 24-hour approval on Facebook.

“What I liked about Prospa when I applied for the loan was the speed,” Anita says. “Questions, done. On the spot decision. Finished.”

She also appreciates Prospa’s convenient small business loan repayment plan.

“My repayments are weekly and it’s for a year. I love that. I’m not going to be bound by that for 10 years or something.”

Cash flow is still an issue, but now it’s one that doesn’t impact the business.

“Right now, I’m waiting on $60,000 to be paid,” Anita says. “But because I’ve got the loan from Prospa as a buffer, I’m not worried.”

What’s next for DNA 1st Solution?

With the Prospa Small Business Loan, Anita has tripled DNA 1st Solution’s warehouse space, setting themselves up to expand their packing capability and the Kingfisher Program.

Anita plans to expand the Kingfisher Program to provide avenues for young Aucklanders to learn more about themselves and their interests.

She also has big plans for the business, including bringing the company’s services to Pacific Islands.

“I can’t wait to do what we have planned. I can’t wait to put it into action,” she says.

A Prospa Small Business Loan has helped DNA 1st Solution:

  • Triple available warehouse space.
  • Grow the Kingfisher Program and help more inexperienced Auckland youth.
  • Smooth out cash flow issues.

If you’re like Anita and want to seize an opportunity but don’t have the cash flow to do so, talk to Prospa about how a small business loan could help on 0800 005 797 or apply online.

The information on this website is provided for general information only and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from financial, legal and taxation advisors. Although every effort has been made to verify the accuracy of the information, Prospa, its officers, employees and agents disclaim all liability (except for any liability which by law cannot be excluded), for any error, inaccuracy, or omission from the information or any loss or damage suffered by any person directly or indirectly through relying on this information.

Customer success story: Gorgeous You

Gorgeous You skin wound and scar management clinic owner and operator Francis Swart had been running her small business out of her home since 2013. But she was starting to experience growing pains. Thanks to a Prospa Small Business Loan, Francis was able to realise her dream of owning her own salon.

Francis’s Gorgeous You salon in Burswood, Auckland, offers a wide range of skin and beauty treatments, including facials and massages. But much of her passion lies in wound and scar management, and helping people of all ages feel comfortable in their own skin.

“You might not be able to ever get rid of a scar or wound completely, but we can manage it in such a way that, when you apply make-up over it, you won’t even see it,” she says. “Or if it’s a body scar, we can manage it to a point where you can look at it and not feel like, ‘Oh, I don’t want to look at that part of my body.'”

Experiencing growing pains

For a few years, Francis operated Gorgeous You out of her own home. That worked for a while, but it soon became time to expand.

“I used to work from home, and we got to a stage where my family really needed their home back,” she says.

“The only way to do that was to move the business out of the house and into premises where I can actually grow my business.”

Having her own premises was also a long-held dream for Francis.

“I’ve always had a home-based salon – while raising children it was just easier. And I would say to my husband, ‘When I’m big, I’m going to own my own salon.'”

The scars of bank rejection

But finding funding from traditional lenders to realise that dream was tough, partly because Francis and her husband didn’t own property.

“They would ask, ‘Are you a property owner?’ When we said, ‘No,’ they would say, ‘Sorry, we can’t help you.'”

One day, Francis and her husband stumbled across Prospa on social media. After enquiring about a Prospa Small Business Loan, the couple heard back within 24 hours.

Francis appreciated that Prospa was easy to deal with, quick, and willing to work with her on a suitable repayment plan.

“Prospa gave us the option to make a weekly repayment,” Francis says. “As a small business owner, I can manage a smaller weekly repayment much better than a huge monthly repayment.”

Dreams do come true

Thanks to a small business loan, Francis has been able to achieve her dream of opening her own salon in Auckland, and fitting out the space.

“The premises were quite old and dilapidated,” she says. “I needed to freshen them up and make it a beautiful space where people wanted to come, where it’s nice, cosy and inviting. That’s what Prospa helped me do.”

Hear more about Gorgeous You’s story:

What’s next for Gorgeous You?

Now that she’s in her own space, Francis is determined to keep her small business moving forward.

“I’ve met with a business coach, and we are busy sorting out goals and how I’m going to grow my business in the next 12 months,” she says.

While Francis hopes to handle the marketing for Gorgeous You, she would like to employ another therapist to help with treatments.

“I just feel so blessed,” she says. “I said to my husband, ‘After all these years, I got to where I’m supposed to be.'”

It seems that with a bit of backing and hard work, dreams can come true.

A Prospa Small Business Loan has helped Gorgeous You:

  • Purchase a new salon.
  • Renovate her new premises.
  • Hire a business coach.

If you have a small business dream that you’d like to turn into reality, talk to Prospa about how a small business loan could help on 0800 005 797 or apply online.

The information on this website is provided for general information only and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from financial, legal and taxation advisors. Although every effort has been made to verify the accuracy of the information, Prospa, its officers, employees and agents disclaim all liability (except for any liability which by law cannot be excluded), for any error, inaccuracy, or omission from the information or any loss or damage suffered by any person directly or indirectly through relying on this information.

Building your business strategy for long-term success

Having a great idea is just the start for any successful small business. That great idea must be backed by a strategy for long-term success. Here’s our step-by-step guide to help you build a solid foundation from which your great idea can grow.

1. Start with the end in mind

First things first – you need to know, and be able to articulate, what you want your business to be. What’s the vision?

You may want to be the café of choice on Lambton Quay, or maybe you want to expand your design company into the South Island. Whatever it happens to be, your big idea will allow you to see what the finish line looks like – and then you can work out what you need to do to get there.

2. Know what makes you special

What truly sets your business apart from your competitors? What is your point of difference that makes what you do so much better – or be so different – than anyone else? If you’re unsure, your customers won’t know either.

It’s natural to find this difficult – often, small business owners are too close to their day-to-day operation to truly see what makes them unique. In that case, talk with your customers and your staff to get a sense of what they value about what you do. It could be your customer service or the quality of your products, or it could be something completely different.

3. Identify what your audience needs

While talking to your customers about what they value about you, take the opportunity to ask about their lives, and their needs too. Understanding how often they go on Facebook or Instagram, for example, may not seem immediately relevant, but it will help you define your marketing strategy. Talking about other products and services they use regularly will help identify product areas worth exploring, or new directions to take your business in.

The best way to conduct this research is by having one-to-one conversations, while you could also complement this with an online survey. Offering an incentive is a smart way to increase the number of people giving you feedback. Provide the option of anonymity too. While the feedback may be painful to read, it will enable people to be brutally honest. Ask the tough questions and be prepared to act on the results.

4. Be aware of your competition

While it would be lovely to have a monopoly on the market, very few companies do. So, you need to know who your competitors are and what they are doing. What products do they stock? What services do they offer? What’s their customer service like? Use this information to improve what you’re doing, and more deeply define your point of difference.

Just because someone else is doing something doesn’t mean you should copy. However, if someone is doing a smart promotion or adding a new service, take note of what works and then think about how you could improve on it.

5. Set SMART goals

Now you’ve gathered information about your business, your customers and your competition, it’s time to define some goals around what you want the business to achieve.

For example, one of your goals might be to increase sales. However, just saying ‘I want to increase sales,’ doesn’t give you much to go on.

A common approach to goal setting is to follow the SMART method. That means setting goals that are specific, measurable, achievable, relevant and timely.

  • Specific: Rather than ‘increase sales’, pick specific stock categories of which you want to increase sales in.
  • Measurable: How much more do you want to sell? Put a number on it.
  • Achievable: Be realistic. It must be achievable, otherwise it’s meaningless.
  • Relevant: Is this goal going to help you achieve your business vision?
  • Timely: The timeframe needs to work for you, your customers and your type of industry.

An example of a SMART goal would be: Increase sales of summer skirts by 20% between October and January.

From there, you need to work out what’s required to do it – do you need more staff, a wider range of stock or a different marketing campaign?

Having your goal is one thing – achieving it is another.

6. Investing in the future

With a clear business vision, understanding of your audience and clarity around how you’re going to achieve your goals, you can now make informed and educated decisions on business finance.

Can you achieve it all with your current finances, or do you need to seek additional investment, such as taking out a small business loan?

If you’re not sure you’re ready to invest, think about where you want to be in five years’ time or even in 12 months’ time, and work backwards to see precisely what needs to happen to get there.

7. Don’t set and forget

Business plans are great, but they should grow and change with you. It should be a living document that you review and evolve regularly.

Opportunities emerge and changes happen in industries, so your business plan should keep on top of that.

Schedule a recurring time to revise your business strategy. If you’re not on track or a new opportunity has come up, be flexible. An ever-evolving plan is the only one that will be able to keep up with your changing business.

And if you need a little help or advice, there are plenty of business coaches, planners, financial advisors and fellow business owners who can help you pull your plan together – and keep it on track.

8. Embrace the challenge!

Being a business owner is tough – that’s why not everyone does it. However, running your own business is also extremely rewarding. Hopefully, you’re excited at the prospect of having a road map for your business’s success. If you have the strategy – and the motivation – to succeed, then you’re giving your business the best possible chance.

Is investment part of your plan to succeed and grow? At Prospa, we provide small businesses across New Zealand with small business loans to suit a variety of growth needs. Call our team on 0800 005 797 or apply online.

The information on this website is provided for general information only and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from financial, legal and taxation advisors. Although every effort has been made to verify the accuracy of the information, Prospa, its officers, employees and agents disclaim all liability (except for any liability which by law cannot be excluded), for any error, inaccuracy, or omission from the information or any loss or damage suffered by any person directly or indirectly through relying on this information.

9 things you can invest in to speed up small business growth

No small business has money to burn, so when it comes to funneling capital back into the operation it can be a daunting prospect. But you shouldn’t be afraid of investing in your venture (beyond just sweat and tears).

Sometimes you need to spend a little to gain a lot. Just make sure you’re spending money where it counts. Here are some suggestions of things you may want to invest in to help your small business grow.

1. An online booking platform

By investing in an online booking and payment solution for your small business, you can spend less time taking bookings and chasing payments, and instead use those spare hours to ensure your customers get the best service possible. It’s more convenient for them, saves you time and cuts down on cancellations and bad debts. That’s a triple win.

2. Improve your website

If you’ve built up your business mostly based on word of mouth, you may not think a polished, ultra-professional website is all that necessary. But in our technology-obsessed world, it’s important to keep your website modern and fresh.

If you don’t have the time, inclination or technical knowledge to do it yourself, a small investment in a professional team can take care of everything for you. Engage a web developer and designer with experience of what works for your type of business, and a content writer who can craft words that will not only entice people to connect with you, but help you be found organically online, too.

3. Outsource the things you don’t enjoy

In the early days, you do almost everything as a small business owner. But surely one of the perks of being your own boss is you get to decide what you do and what you delegate. So whether you outsource your social media management to a specialist or your admin to a virtual assistant, consider freeing up your time to grow the business by investing in some additional help.

4. Partner with a financial expert

Investing in a good accountant who understands your small business and your industry is worth its weight in gold. Smart accountants who know how to maximise deductions and manage cash flow are often a big part of a thriving business, and they can advise you on the best structure for your business too. Many accountants will also give you access to their accounting software, which will enable you to manage your business’s finances a lot easier.

5. Buy more efficient equipment

It doesn’t matter whether you run a pub, dry cleaning service or burger shop, getting popular means more customers – and inevitably longer wait times. But there are ways to stop customers from turning away disgruntled. Can you invest in better, faster equipment? Do you need to hire more casual staff at popular times? In most cases, a minor investment today can lead to bigger rewards tomorrow.

6. Market your small business

You’ve done everything possible to get your small business up and running – now you just need more customers. It might be time to invest in a more sophisticated marketing strategy, incorporating a mix of modern tactics such as Google Ads, SEO improvements, content marketing, social media targeting and email campaigns. If you operate locally, a good old letterbox drop can also keep your business front of mind.

7. Order more stock of what’s popular

Sounds simple enough – but investing in what’s popular can be a smart strategy. If you consistently run out of a product that customers adore, increase your order. An improved wholesale rate can boost your margin too. You may want to consider investing in a three-month trial of the larger wholesale order and see if it’s worth it.

8. Your own professional development

Running a busy small business with lots of customers to impress and staff to manage means people management should be one of your best skills. But investing in some HR training and business management seminars may be the next step to help you grow.

9. Protect yourself with business insurance

As your small business grows, you will likely take on new jobs, expand to new locations and deal with suppliers you never anticipated at the startup phase. Now’s the time to check your business insurance covers you if anything goes wrong. For example, if you’re expanding to a new premise be sure to check if your policy also covers earthquake damage.

So, you’ve done your due diligence and want to invest in your small business, but you don’t have the capital to do so? Prospa might be able to help. Get in touch to find out how.

The information on this website is provided for general information only and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from financial, legal and taxation advisors. Although every effort has been made to verify the accuracy of the information, Prospa, its officers, employees and agents disclaim all liability (except for any liability which by law cannot be excluded), for any error, inaccuracy, or omission from the information or any loss or damage suffered by any person directly or indirectly through relying on this information.

6 questions to ask before getting a small business loan

From new premises to new technology, small businesses are presented with opportunities all the time, and each has to be considered on its merits. If you’ve done your research and believe the idea’s got legs, but need finance to fund it, a small business loan could be the answer.

But first, here are six questions to ask yourself before taking on finance.

What’s the small business loan for?

While your business is something you’re likely emotionally invested in, it’s vital to remain objective about any opportunity that emerges. It is business after all. So before deciding whether a small business loan is a good option, be crystal clear on what you’re intending on using the money for and what positive impact it will have on your business.

How much finance do you need?

If your financial projections suggest your business will benefit from a cash injection, then the next step is to work out how much you’ll need. Remember to factor in any costs associated with what you’re using the loan for. For example, if you intend to buy a new vehicle or a new piece of equipment, it’s going to need insurance.

What’s your current position?

It’s one thing to know how much is in the bank today – it’s another to have an accurate picture of what’s coming up. Make sure your cash flow forecast is on point, all knowns are accounted for, and you are confident you can make the regular repayments, even in quiet periods.

How’s your credit history?

If you’re thinking about applying for a small business loan, it’s a good idea to check your credit report, so you can correct any mistakes, as this will impact your loan application. There are three credit reporting companies in New Zealand: Centrix, illion and Equifax. The New Zealand Government provides a handy guide on the best way to check your credit report.

Is there other funding that could help?

Is a small business loan definitely the right option? For example, if you’re a Kiwi business looking at a loan for R&D, you could be eligible for business growth funding through Callaghan Innovation – New Zealand’s innovation agency. Worth a look!

Make it easy to get a ‘yes’

At Prospa, it’s our mission to keep small business moving, providing small business loans of $5,000 to $150,000. To apply, all you need is identification (i.e. a valid Driver’s Licence) and some information about your business (including your trading time, ownership details and an active New Zealand Business Number). Note: to qualify for a Prospa Small Business Loan, you need to have been trading for at least six months, with a minimum monthly turnover of $6,000.

It takes 10 minutes to fill in the online form and we can often provide a response within one hour, as long as you’ve applied during standard business hours and allow us to use the advanced bank verification system link to instantly verify your bank information online.

So, the clearer the information you provide to us about your business, the easier it is for us to say ‘yes’.

Discover how a small business loan could help your business grow. Find out more or contact us on 0800 005 797.

The information on this website is provided for general information only and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from financial, legal and taxation advisors. Although every effort has been made to verify the accuracy of the information, Prospa, its officers, employees and agents disclaim all liability (except for any liability which by law cannot be excluded), for any error, inaccuracy, or omission from the information or any loss or damage suffered by any person directly or indirectly through relying on this information.