As the economy recovers, opportunities are opening up this year for New Zealand’s small and medium-sized enterprises (SMEs). On top of the potential of lower interest rates, businesses can take advantage of further gains if they consolidate their debts wisely and combine that debt consolidation with the government’s Investment Boost. Make sure you don’t miss out.
In the aftermath of the recession, SMEs face a range of challenges and opportunities.
Globally, the Reserve Bank of New Zealand (RBNZ) fears that increased tariffs imposed by US President Donald Trump will reduce trade and economic growth.
“The weaker global economy may hurt our exporters, but some may benefit if tariffs on us are lower than on other countries,” it says.
“In both New Zealand and overseas, high uncertainty about tariffs is likely to cause businesses to delay some investment and hiring plans. Households may save more.”
On the positive side, the RBNZ says economic activity is recovering in New Zealand and core inflation is declining. While inflation could increase temporarily this year on the back of higher electricity and food prices, the RBNZ expects it to stay within its target of 1-3%.
It says higher dairy and beef prices are boosting the incomes of farmers, while lower interest rates are encouraging households to spend more and businesses to invest.
The RBNZ cut interest rates to 3.25% in May, marking the sixth consecutive rate cut. A total of 225 basis points have been slashed since August 2024. But the RBNZ adds: “It will take some time for low interest rates to have their full effect, particularly given higher global uncertainty.”
For small businesses, this evolving economic environment presents both risks and opportunities. With interest rates at their lowest in years, it’s an ideal time to re-evaluate existing financial commitments and consider strategies that support better cash flow and investment-readiness.
Debt consolidation
As your business has evolved over the years, you may have funded its development via various sources of debt – everything from credit cards, overdrafts and lines of credit to different types of business loans. But each method of financing comes with different interest rates, fees and repayment terms. Managing them all may sometimes feel like an endless juggling act.
Debt consolidation involves rolling all these different debts into a single loan from one provider at the lowest interest rate possible. The new loan is then used to pay off the older loans over the same or a longer or shorter period.
Consolidating high-interest debts into a single loan with a lower rate decreases the total interest paid over time. It could also reduce the cash flow repayments required each month. Making smaller payments over a longer period may reduce your monthly interest bill, improve your cash flow and free up capital for other uses.
You might also benefit from changing from a principal/interest product to an interest-only product or using a leasing product.
Working with a single lender instead of juggling multiple debts can save time, reduce admin, and make financial management more straightforward. For some businesses, this could mean exploring debt consolidation options that align with their cash flow needs. Plus, you may be able to borrow more than the value of the combined loans and use that cash to fund other business needs. In addition, consistent and timely repayments on a consolidated loan may enhance your business’s credit rating, improving your access to future financing.
When consolidating your debt, however, you should check for other costs, such as penalties for paying off your original loans early, application fees, legal fees, valuation fees and stamp duty.
By consolidating existing debts, businesses may be able to reduce monthly repayments and improve overall cash flow. That additional breathing room can then be used to invest in eligible assets under the government’s Investment Boost scheme – positioning SMEs to take full advantage of this new tax incentive.
Investment Boost
Investment Boost is a new tax deduction for all businesses. From 22 May 2025, businesses can claim 20% of the cost of new assets as an expense and then claim depreciation as usual on the remaining 80%.
To claim, the asset must be new or new to New Zealand and depreciable for tax purposes.
Businesses can claim for new commercial and industrial buildings, improvements to depreciable property (but not residential buildings) and for primary sector land improvements.
They can also claim mixed-use assets arising from petroleum development expenditure and mineral mining development expenditure incurred on or after 22 May 2025 (except rights, permits or privileges).
There is no limit to the value of new investments they can claim for.
This incentive is designed to encourage investment in productive assets such as machinery, tools and equipment. For SMEs, this policy presents a unique opportunity to enhance operational efficiency and competitiveness.
Summary
With interest rates easing and new incentives on offer, now is a good time for New Zealand SMEs to take stock of their finances. Consolidating existing debts could ease cash flow pressures, while the Investment Boost gives businesses a timely reason to reinvest in assets that support future growth.
