Top 13 FAQs About Business Loans in New Zealand

If you are looking for a business loan, the process and the information required can appear daunting at the outset. Consequently, it is essential to look at different areas of funding for business, how these may impact you and what you need to do. When looking at how to get a business loan, remember, each application will be looked at in isolation as there will be different factors to take into account.
You will probably have many questions about how to get a business loan. Some of them may seem relatively trivial, but you must have a clear picture of what you are signing up for before applying. Some of the more common questions include:-
What deposit is typically required for a business loan?
Many business loans don’t require an upfront deposit, though the specifics depend on the loan’s purpose and your company’s financial health.
If you can contribute personal or business funds towards an investment, it can reduce your long-term interest expenses.
Most small business lenders offer flexibility, recognizing that each loan application is unique.
How accessible are small business loans for new or struggling companies?
The small business loan market is diverse, with lenders catering to various risk profiles. While top-tier lenders focus on established businesses, others specialize in assisting companies facing short-term challenges.
Generally, you should be able to find lenders willing to consider most business loan applications, provided you meet their criteria.
Which type of business loan should I choose for my company?
Business loans come in various forms, including construction loans, bridging finance, equipment loans, asset finance, and traditional small business loans. The best choice depends on your specific situation and needs.
While personal and business loans have different considerations, sometimes a director may need to provide a personal guarantee for a business loan.
It’s crucial to find a loan type that aligns with your requirements and financial circumstances.

How much can I realistically borrow for my business?
Theoretically, with sufficient collateral and cash flow, you could borrow substantial amounts, potentially reaching hundreds of thousands of dollars. However, the loan amount largely depends on your business’s financial health and the purpose of the loan.
A company seeking a larger loan with significant security and strong cash flow may receive a quicker positive response compared to a smaller loan request with limited collateral.
Be realistic, but remember that if the planned investment would significantly benefit your business, various options may be available.
Is collateral always necessary for securing a business loan?
Most small business loans require either collateral or a personal guarantee from the owner or director. Providing collateral can be advantageous in two ways: it may lead to a more favorable review of your application and potentially result in a lower interest rate.
The terms of any loan application are considered on a risk/reward basis, so the more security you can offer, the better your terms might be.
It’s worth exploring all options to secure the most favorable loan terms.
How long does it take to receive funds after loan approval?
Once your loan is approved and all paperwork is in order, funds are typically available immediately.
It’s crucial to maintain open communication with your lender from the start, ensuring all relevant information and documentation are provided promptly.
For instance, if you’re looking to acquire business machinery, any delay could jeopardize the potential purchase. Lenders usually require proof of identity for company directors/business owners and may request recent profit and loss accounts.
Can I pay off my business loan early, and are there penalties?
Whether you wish to increase your monthly repayments or make a full and final early repayment, this option is generally available with business funding.
However, it’s important to be aware of the fine print when seeking business funding. Some lenders may charge an early repayment fee, typically a set administration charge that can vary between lenders. Some lenders won’t charge at all!
Is it possible to increase my loan amount during the repayment term?
If you’re up-to-date with repayments and have a legitimate reason to increase your business loan, there’s a good chance your lender will consider your request.
Increasing your loan mid-term often involves refinancing. Part of the new loan would repay the outstanding initial loan, resulting in one loan and one monthly repayment.
There may be some administration charges when changing the terms of your initial loan, which you should discuss with your lender.

How does my credit rating affect my business loan application?
As a responsible lender, Alternate Finance considers the business credit rating and those of any third parties involved in the loan application.
We understand that short-term difficulties can sometimes mask a business’s long-term potential. Introducing collateral can often balance the negative impact of a challenging credit rating.
A challenging credit rating doesn’t necessarily mean your business loan will be refused. This is another reason to be upfront and frank with your lender in early discussions.
What factors determine the interest rate on my business loan?
The interest rate on your business loan will reflect your business’s strength, available collateral, and ultimately, the lender’s perceived risk.
At Alternate Finance, our interest rates range from 13.95% to 26.98%, depending on the financial status of the individuals and the business.
If a loan isn’t feasible, we’ll be honest and upfront. It’s not in either party’s interest to agree to a loan that’s unlikely to be repaid.
Do I need to provide a personal guarantee for my business loan?
It’s common for lenders to request a personal guarantee from a director or business owner for a business loan. This guarantee serves as a form of collateral, transferring the debt obligation to you if the business struggles with repayments. Your personal credit rating and financial status will be reviewed as part of the application. Be aware that offering a personal guarantee means you could be held personally responsible for the loan.
What happens if I miss a payment on my business loan?
A single missed payment isn’t usually catastrophic, provided you can catch up quickly. However, multiple missed payments will likely prompt a review of your loan. If you’re experiencing financial difficulties, contact your lender immediately. Options may include refinancing your loan over a longer period to reduce monthly payments or arranging a payment holiday. Persistent financial problems could result in the lender calling in any security or collateral.
Can I extend the duration of my existing business loan?
In certain circumstances, it may be possible to extend your loan duration before the original repayment date. This decision depends on your business’s financial viability in the short, medium, and long term. At Alternate Finance, we understand that businesses can face temporary cash flow issues without impacting their long-term potential. Where viable, we may offer to extend the loan duration, typically through refinancing, to reduce short-term financial pressure and preserve medium to long-term potential.
What documentation is typically required for a business loan application?
Common documentation includes:
- Business financial statements (balance sheet, profit & loss, cash flow)
- Tax returns (business and personal)
- Bank statements
- Business plan
- Proof of ownership
- Legal documents (licenses, registrations, leases)
- Collateral documentation (if applicable)
- Personal financial statements of owners
- Accounts receivable and payable aging reports
Are there different loan options for startups versus established businesses?
Yes, loan options can vary significantly between startups and established businesses. Established businesses often have access to traditional bank loans, lines of credit, and larger loan amounts due to their financial history and proven track record. Startups may need to explore options like microloans, angel investors, venture capital, or government-backed loans designed for new businesses. Some lenders offer specific startup loans, but these often require personal guarantees or collateral.
How does seasonal cash flow affect my ability to get a business loan?
Seasonal cash flow can impact your loan eligibility and terms. Lenders will want to see that you can manage repayments during slower periods. When applying, provide detailed financial projections showing how you’ll manage seasonal fluctuations. Some lenders offer seasonal business loans with flexible repayment schedules aligned with your cash flow. Alternatively, consider a line of credit that allows you to draw funds as needed and repay during peak seasons.
How to get a business loan
To increase your approval chances, ensure your business financials are in order and up-to-date. Prepare a solid business plan demonstrating how the loan will be used and repaid. Improve your credit score if possible. Consider offering collateral or a personal guarantee. Be transparent about your business’s financial situation and future projections. Having a clear purpose for the loan and showing how it will benefit your business can also strengthen your application.
Alternate Finance
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Alternate Finance offers instant cash loans NZ wide and is an established and trusted local money lender with active charitable undertakings.