A small business loan can be the fuel to help your small or medium-sized enterprise (SME) grow. For many business owners throughout New Zealand, receiving approval for much needed business loans and working capital solutions is more difficult than it needs to be.
The right small business loans from a lender such as ScotPac can provide your business with what it needs to achieve its long-term goals and success.
To help you get started, we’ve put together this handy guide covering all things small business loans in NZ.
What is a Business Loan?
A business loan is a type of working capital solution designed specifically for businesses. Simply put, a business loan is an arrangement where a lender – such as ScotPac – provides a lump sum of working capital to a business. The borrower is required to repay the loan over a set period of time and via regular repayments, plus interest and any associated fees. Most commonly, repayments are made monthly – however, this can often be tailored depending on your lender.
What are Business Loans used for?
Business loans can be used to fund any business-related expense. This can include purchasing new equipment or replacing machinery or expanding service lines and product offerings. Some businesses even use business loans to hire more staff, renovate operating premises, or assist with cash management – particularly during periods of tight cash flow or gaps in income.
What are Secured and Unsecured Loans?
Business loans can be secured or unsecured.
Secured loans require applicants to provide collateral as security in the event of a default and the loan not being repaid. Most often, property is used as collateral. Unsecured loans do not require any collateral to be put up as security – however, they are likely to carry higher interest rates. Some lenders may also require a personal guarantee instead.
At ScotPac, we provide business loans for sums of $10,000 to $200,000, with unsecured loans – which make up 80% of our total business loans – available for sums of up to $100,000.
How do Business Loans Differ from Non-Business (Personal) Loans?
Business loans and personal loans differ for a number of reasons. Most notably, personal loan funds can be used to cover business expenses or pursuits – but business loans cannot be used to cover personal expenses.
There are a few other differences worth bearing in mind:
Loan amounts
Personal loans are typically for lower amounts of money and business loans for higher sums.
Personal Credit Score
By their nature, personal loans require a solid personal credit score, whereas business loans do not necessarily require one.
Secured vs Unsecured
Personal loans are generally unsecured or require personal assets to serve as collateral whereas business loans can be secured or unsecured and may use business assets as security.
Tax implications
An important difference between the two types of loans is that interest incurred on personal loans is generally not tax-deductible, whereas interest on business loans is.
Understanding Small Business Loans
In general, a small business loan is considered to be a loan product specifically designed for SMEs and of a significantly lower amount than business loans available to large conglomerates and corporations.
While there is no strict delineation, small business loans are generally considered to range from tens of thousands of dollars up to $5 million. Large business loans can exceed $5 million and are often used by established companies for major expansions or acquisitions.
However, as with larger business loans, small loans can still help business owners meet their operational expenditure needs, invest in new stock or equipment as required, and exercise sufficient agility to capitalise on market opportunities.
It is important to note as well that small business loans can come with different eligibility requirements and differing levels of complexity in the application process.
Why Small Business Loans can be Useful
For SMEs in New Zealand, small business loans could be the right solution for your needs.
It provides fast, easy access to working capital to fund short-term expenses, seize market opportunities, and weather seasonal downturns.
For ambitious and growing businesses, small business loans allow the right level of working capital access without the risk of over-leveraging with large debt obligations. Specific advantages of a small business loan include:
- Fast approval turnarounds
- Simple approval processes
- Minimal documentation requirements
- Flexible loan terms
- Competitive interest rates to help improve credit scores
- Lower overall interest payments thanks to shorter repayment terms
Small Business Loans with ScotPac New Zealand
With ScotPac, you can access up to $200,000 in small business loan funding – often within just 24 hours of approval. Thanks to our simple online application process, you can complete the form in just five minutes with minimal documentation – and in many cases, receive a same-day credit decision. Plus, we offer both secured and unsecured loans with customisable repayment terms tailored to your specific needs.
What to Consider Before Applying
If you are considering a short term loan for your business, make sure to speak to a lending specialist at ScotPac today.
Before applying, make sure you’ve considered the following:
- Are you able to provide a personal guarantee in lieu of collateral for the loan if required?
- Have you been operating in the same location for 12 months or more?
- Are all applicants or business owners New Zealand citizens or permanent residents?
- Will a higher interest rate cost you more in the long run, or will the shorter loan term help you save on interest overall?
How to Apply for a Small Business Loan with ScotPac
Once you’ve consulted with our lending specialists and received tailored expert advice, you’re ready to apply for your small business loan.
The entirely online lending application process leaves out the red tape of traditional bank loans and offers a faster and easier client experience. To streamline the process further, ensure you have documentation ready – such as ID for the business owner or applicants, and six months of bank statements.
Contact ScotPac to learn more
For business owners in New Zealand, the right small business loan from the right lender can provide an affordable and tailored finance solution to help you access the working capital you need.
ScotPac is New Zealand and Australia’s largest non-bank lender, with over 35 years of industry experience. So, turn to the team supporting 8,500 other businesses and arrange a consultation with our lending specialists by calling us today.
