Our review of the scenario for small business finance in New Zealand starts with a look at general financial management and concludes with New Zealand specific financing sources.
This page comes under the section New Zealand Small Business.
Raising finance is important; but unless you manage the funds that you raise, you'd always be trying to raise more funds, instead of managing your business. Hence a starting review of financial management.
Financial management starts with estimating realistically how much money you need. You need money
You need
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You need time for your marketing efforts to raise sales volumes to required levels. The monthly growth in sales has to be estimated realistically.
Finally, you need to look at the pattern of cash flows. You might sell something now, but the cash for that sale might come only after a month or so. On the other hand, you might buy some equipment now but pay for it in instalments over two or more years. All these patterns have to be considered before you know how much money you need.
All these are brought together in your Business Plan, based on which you prepare sales forecasts, profitability estimates and cash flow statements. The cash flow statements will indicate when you will face cash shortages. You can now negotiate financing arrangements to tide over these shortages.
Financial management also involves selecting the right type of financing. There are, for example:
You also need to bring in a minimum of equity, in the form of your own funds or investment from venture capitalists.
We discuss Small Business Planning and Small Business Financing on separate pages of this website. We now look at some specific sources of small business finance in New Zealand.
As in all modern economies, New Zealand also has a banking system that provides funds to businesses. Banks evaluate financing requests from businesses to make sure that the borrower would be able and willing to repay the loans. Ability is assessed by checking the viability of the business proposal. Willingness is assessed by checking the credit record and character of the borrower.
New entrepreneurs might find it difficult to convince banks by themselves. They can prepare themselves better by approaching a BIZ centre near them. BIZ can help you develop financing plans and proposals that would be acceptable to banks.
There are also grants and special financial assistance.
Venture Capital Funding is available to business projects that promise quick and high growth. Venture capitalist would invest in your business, and later sell their investments at a profit when your business has grown. If you are willing to accept such outside investment in your business (with possible loss of control to some extent) you can check out New Zealand Venture Capital Association.
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