Being ready for better times
This financial year has started on a far better note than the last one, promising a host of future growth opportunities if you are well-positioned to capitalise on them.
Stats NZ reveals that the economy recovered more strongly than expected in the three months ended December, with gross domestic product rising 0.7%. The Reserve Bank of New Zealand had forecast growth of only 0.3% over the quarter.
The central bank expects economic activity to recover over 2025, as lower interest rates and stronger earnings for some exporting industries support demand.
However, the chaos in international financial markets over the past few weeks may derail economic growth going forward.
Infometrics, an economic consultancy, says the emerging international trade war is creating much uncertainty and could knock as much as 1.4 percentage points off New Zealand’s GDP growth in 2026.
As a result, it has revised its predictions for GDP growth next year down from 2.4% to 1% a year, noting that weaker exports could dampen business investment and household spending.
“The blanket tariffs of 10% announced for all imports to the US, alongside the much higher tariffs imposed on China, are set to significantly slow economic growth in the world’s two largest economies,” says Infometrics chief forecaster Gareth Kiernan.
“The ‘on again, off again’ nature of the tariffs is also creating a difficult environment for businesses to make investment and hiring decisions with any confidence.”
Being ready for when growth comes
There are various growth strategies you can use when the economy picks up or opportunities open up, including selling more products and services to your existing markets, finding new markets or innovating and improving your offerings.
However, growth can be challenging and costly. It can come with higher overheads and the need for new technology and equipment, bigger premises, increased inventory and new staff. So, it’s important to have the funding available to take advantage of any breaks you encounter.
According to MYOB, New Zealand’s SMEs traditionally rely on private funding sources, from bank overdrafts (50%), personal loans or mortgages over the family home (41%) or their credit card (36%).
While many local SMEs have never attempted to access business finance, MYOB says almost a third have sometimes or frequently struggled to secure additional funding.
This is because New Zealand’s traditional banks have relatively strict lending criteria and often require collateral in the form of property or another asset.
The good news for SMEs is that borrowing is set to become more affordable because further cuts in interest rates are expected to follow the 25 basis points cut in the official cash rate to 3.5% in April. You will pay lower interest payments on your existing loans and are likely to obtain more favourable interest rates on any new loans you take out.
Other sources of funding you could consider include government grants, finding an investor who will take a stake in your business and crowdfunding.
Choosing the right finance
We all know that “cash” is king, but having the right type of finance for your needs can make a big difference to your bottom line.
It’s important to align the term and source of your funding with your goals and operational requirements. Some of your needs will be short-term – for example, financing day-to-day operations like payroll, inventory and accounts payable. Others will be long-term, such as financing for assets like equipment, vehicles, real estate or long-term expansion.
You will also find solutions that allow you to access finance tied to your activities.
For example, Invoice Finance allows you to access the cash locked up in unpaid invoices owed by your clients. An invoice financier may pay up to 80% of your invoice value within 24 hours after it has been issued. It will then pay you the balance, less a small fee, after it has collected payment from your customer.
The benefit is that you get tomorrow’s payments today and you don’t have to put property down as your invoices act as security for the loan. As your small business grows, your invoice finance facility can scale with it without you having to ask for a credit increase.
Another alternative is Trade Finance, available if you import or export. It allows you to obtain fast funding to buy the stock, inventory and raw materials you need from domestic and international suppliers.
Trade Finance can be tailored to your business’s needs no matter how simple or complex your trade requirements are.
Lenders such as ScotPac facilitate transactions using TT (telegraphic transfer), Letters of Credit or Documents Against Payment.
Trade Finance helps you boost your purchasing power and can mitigate the political, economic, transport or trade risks associated with international purchases.
This type of protection could come in handy given the uncertainty created by the global trade war which could affect exchange rates, international demand and production costs.
Also available are Business Loans targeted at SMEs. These are offered by a range of financial institutions although SMEs may find it is easier and faster to obtain a loan from a non-bank lender than a traditional bank.
Business loans offer customisable repayment options and flexible loan amounts, enabling you to tailor the loan to your needs. Interest paid on business loans is often tax-deductible and some loans don’t require collateral, so you can access funding without risking your assets.
To choose the right business loan, you should understand your business needs and financial situation, including the loan purpose, amount and repayment capacity. Then, you should compare different loan types, interest rates, fees and loan terms from various lenders. Also, consider seeking advice from a financial expert so that you make the right choice.
Take out
As the economy improves, new growth opportunities are likely to open up if you are well-positioned to capitalise on them. Have a look at how having the right choice of funding may pay off.
