New Zealand’s economic bedrock cracking

New Zealand’s economic bedrock cracking

New Zealand SMEs are struggling to grow due to increasing cashflow pressure, a slowing economy and limited ability to fund their businesses reveals findings released today by Lock Finance, New Zealand’s leading independent business finance and factoring company.

The findings reveal that up to 80% of SME bank loans are secured with residential property, leaving SMEs with concerns about linking their business success to the family home and dependent on the sustainability of the New Zealand property market.

Commenting on the findings, Executive Chairman of Lock Finance, Peter Goodfellow, said: “With 96% of the New Zealand businesses falling into the SME category, small companies drive the New Zealand economy. Limited capital inhibits business growth and is a key contributor to business failure. Relying on personal assets to fund business is risky and New Zealand SMEs need to look for alternative ways to fund growth without putting their homes on the line.”

Goodfellow said that one of the biggest barriers to growth is that small businesses are often unaware of the different options available to them.

“They often think that because they are small, no-one will want to know about them, let alone help them with their finances. The reality is that if the business can demonstrate growth potential, there are several options available.”

Lock Finance is the only business finance company in New Zealand to offer fully integrated funding options for a range of SME requirements. The company offers a combination of working capital, trade finance, debtor finance and factoring. Working capital can be used as a fluctuating overdraft limit or term loan. Trade Finance assists with international payments whilst debtor finance and factoring are tools to turn company sales into immediate cash.

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Goodfellow says a small but significant number of SMEs name cashflow as a major issue, but that restricted cashflow was the biggest barrier for small companies struggling to expand.

“As the housing market cools and interest rates rise, New Zealand SMEs need to use business equity – not their homes - to fuel economic growth. There needs to be a greater awareness of the value of funding through different options.”

To help businesses optimise their growth potential Lock Finance has re-branded ahead of a campaign to educate SMEs about the potential to free up cash within their businesses. The company (formerly S.H Lock), begins a road show this week to explain the fully integrated combination of working capital, trade finance, debtor finance and factoring available to the SME market.

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