How much can my business borrow in New Zealand?

People ask Mr this one more than any other, usually in the first breath of the conversation. Fair enough — there’s no point planning a new van, a bigger stock order or an IRD clean-up if the number isn’t there. The honest answer is that there are two measuring sticks, and which one applies depends on whether property is part of the picture.

What decides how much a New Zealand business can borrow?

Lenders ask three quiet questions behind every application:

1. What backs this loan? Property, or the business’s own trading.
2. Can the business afford the repayments? Shown by turnover, margins and the rhythm of money in and out of the bank account.
3. How does the loan end? Paid down from trading, refinanced to a bank later, or cleared by a sale or settlement.

If property is offered as security, the first and third questions do most of the heavy lifting. If there’s no property, the second question is almost everything.

How is a property-secured loan sized?

With property security, business loans run from $20,000 to $5,000,000. The lender looks at the property’s value, subtracts what’s already owing against it, and applies its own maximum loan-to-value ratio (LVR). What’s left is your usable equity, and that sets the ceiling.

An illustrative example, with made-up numbers:

Item	Illustrative figure
Value of a house in Hamilton	$900,000
Existing home loan	$450,000
Equity on paper	$450,000
Equity a lender might work with (after its LVR limit)	Noticeably less than $450,000

The gap between “equity on paper” and “equity a lender will use” catches people out. Lenders leave a buffer for valuation movement and costs, and second-mortgage lenders usually leave a bigger one than first-mortgage lenders. Our page on how much equity you need walks through it properly.

Property-secured lending also cares about the exit. A short-term loan secured on property is often repaid when something specific happens — a refinance to a bank once the books are tidy, the sale of an asset, or a large contract payment landing. A clear exit can matter as much as the equity itself.

How is an unsecured business loan sized?

Without property, options for trading businesses typically run from $5,000 to $500,000. Here the size of the loan follows the size and steadiness of the business:

• Turnover. Unsecured lending is usually a slice of annual sales, not a multiple of it.
• Bank statements. Lenders read several months of business statements for regular deposits, dishonours, overdraft use and existing loan repayments.
• Time trading. A business with a longer track record is easier to assess.
• Existing debt. Other lenders’ repayments come out of the same cash flow.

Two businesses with identical annual turnover can get very different answers. A café with steady daily takings looks different on a statement from a contractor paid in three lumps a year, even if the totals match.

If you’d like a feel for where you sit before talking to anyone, the funding readiness check asks eight quick questions and gives you a plain-English read-out. When you’re ready for a real number, ask us here — it takes about a minute.

Why “how much can I borrow” is the wrong first question

Mr’s gentle push-back: the better question is how much should I borrow? The amount a lender will approve and the amount your business can carry comfortably aren’t always the same.

A few sense checks before you settle on a figure:

• Work out the real need. Add the cost of the thing you’re funding, any GST you’ll pay up front (and get back later if you’re registered), and a modest buffer.
• Map the repayments against your quiet months. If your trade drops away in winter or over the Christmas break, make sure repayments still fit.
• Think about the end. For a short-term loan, write down how and when it gets repaid.
• Don’t borrow to cover a hole you haven’t diagnosed. If cash is tight because customers pay late or margins are thin, a loan buys time but won’t fix the cause.

What can push the amount up or down?

Pushes it up	Pulls it down
More equity in property	High existing borrowing against the property
Steady, regular deposits	Frequent dishonours or bounced payments
Longer trading history	Very new business with no track record
Clear purpose and exit	Vague purpose, no repayment plan
Tax affairs up to date or under an arrangement	Overdue IRD debt with no plan

None of the “pulls it down” items is automatically a deal-breaker. Bad credit and IRD debt are looked at case by case, and property can often make up for a thin trading history. It just changes which options are realistic. See secured or unsecured? for how the two routes compare.

Two illustrative owners, two different answers

These examples are made up to show how the measuring sticks work. They aren’t offers or quotes.

Aroha runs a joinery workshop in Tauranga. She’s been trading for six years, deposits are steady, and she owns a house with a good chunk of equity. She wants to buy a second CNC machine and hire an apprentice. Because she has both trading history and property, she has a choice: a modest unsecured loan sized on her turnover, or a larger property-secured loan that covers the machine, the hire and a buffer. The conversation is about which is cheaper overall and which repayment pattern suits her winter dip.

Sam opened a food truck in Christchurch nine months ago. Sales are growing but lumpy — big on event weekends, quiet midweek. He rents, and his statements show the account sometimes runs close to zero before payday. An unsecured lender might offer a small facility, sized cautiously on what the statements show. If Sam’s parents were willing and able to offer security over their property, with independent legal advice, a larger amount could become possible. Otherwise, another six months of tidy statements will widen his options.

Same question, very different answers. That’s why Mr never quotes a number before hearing the details. What both owners can do straight away is gather six months of business bank statements, know their property position (if any) and write down exactly what the money will do.

What questions will I be asked?

Expect a specialist to ask:

• how long you’ve been trading and what your monthly turnover looks like;
• what the money is for, and when you need it;
• whether you or a supporter own property, its rough value and what’s owing;
• whether any tax is overdue, and whether there’s an arrangement with IRD;
• anything on your credit file you’d like to explain.

Short, honest answers to those five areas usually tell us within one phone call which range you’re in.

So what’s my number?

Here’s where Mr stops guessing and a real person takes over. Tell us roughly what you need, what it’s for, whether you own property, and how long you’ve been trading. There’s no credit check when you first ask, your details aren’t handed round a crowd of lenders, and a specialist rings you to talk it through.

Please answer the form as accurately as you can — especially the amount, your property position and anything owing to IRD. Accurate answers mean the first option we put in front of you is one that actually fits. Find out what your business could borrow.